Bank of England governor Andrew Bailey has said Threadneedle Street is keeping its “eyes open” for risks to the economy or financial system ahead of its next scheduled interest rate decision on 7 May.
Bailey also highlighted the huge amount of uncertainty the UK economy still faces. “No one can be sure exactly how the coronavirus pandemic will unfold,” he said.
Writing in the Sun this weekend, Bailey ran through the “unprecedented” measures the Bank has taken to support the UK economy during the coronavirus pandemic.
The UK now has close to 150,000 officially recorded cases and more than 20,000 people have died. Experts believe the true number of dead could be more than double that, given that those who die outside of hospital are not counted.
Bailey said: “The virus and the measures taken to stop it spreading are dramatically reducing activity in the economy.” Just over a week ago the governor said UK GDP could shrink by 35 per cent in the April to June period compared to the previous three months.
Yet he said the Bank has “as far as possible” helped to “keep companies running and hard-working people in their jobs”.
The Bank’s interventions include slashing its main interest rate to a record low of 0.1 per cent, injecting £200bn of newly created cash into the economy through the bond markets, and a loan scheme that buys companies’ short-term public debt.
“My colleagues and I at the Bank of England will do all we can to support everyone through this difficult time,” Bailey said. “We’ve got your back.”
Bailey’s article came a week and a half before the Bank’s monetary policy committee (MPC) is scheduled to meet to decide whether interest rates should be changed. It is unlikely they will be altered, with Bailey and many at the Bank believing 0.1 per cent is as low as they can go.
The MPC is also set to publish its economic report into the economy that is released four times a year. The so-called inflation report is likely to lay bare the huge scale of the damage caused by coronavirus, and would be the first major official report on the economy.
The Office for Budget Responsibility (OBR) two weeks ago released a “scenario” in which the UK economy shrinks by 13 per cent in 2020. It said it was not a forecast, however, as there is too much uncertainty about coronavirus and the economy.
The Bank may also stop short of making an official forecast, given the high levels of uncertainty about when the coronavirus lockdown will end.