Bank of England warns of deepest recession on record

From Agencies,

The Bank of England has warned that the coronavirus pandemic will push the UK economy towards its deepest recession on record.

It said the economy was on course to shrink 14% this year, based on the lockdown being relaxed in June.

Scenarios drawn up by the Bank to illustrate the economic impact said Covid-19 was “dramatically reducing jobs and incomes in the UK”.

Policymakers voted unanimously to keep interest rates at a record low of 0.1%.

However, the Monetary Policy Committee (MPC) that sets interest rates was split on whether to inject more stimulus into the economy.

Two of its nine members voted to increase the latest round of quantitative easing by £100bn to £300bn.

The Bank’s analysis was based on the assumption that social distancing measures are gradually phased out between June and September.

Its latest Monetary Policy Report showed the UK economy plunging into its first recession in more than a decade. The economy shrinks by 3% in the first quarter of 2020, followed by an unprecedented 25% decline in the three months to June.

This would push the UK into a technical recession, defined as two consecutive quarters of economic decline.

The Bank said the housing market had come to a standstill, while consumer spending had dropped by 30% in recent weeks.

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