Left Menu
Development News Edition

Bank of England ready to buy more bonds if needed to help limit coronavirus impact

Reuters | Updated: 26-03-2020 21:48 IST | Created: 26-03-2020 21:32 IST
Bank of England ready to buy more bonds if needed to help limit coronavirus impact
Representative Image Image Credit: Pixabay

The Bank of England held off from taking fresh action to stop the coronavirus crisis from plunging Britain's economy into a long recession on Thursday but said it was ready to ramp up its bond-buying program further if needed.

The BoE said that while it was not yet able to assess the likely scale of the hit, many firms were already describing it as worse than during the 2008 financial crisis. The central bank, which carried out two emergency rate cuts earlier this month, kept its key interest rate at a record-low 0.1% and the size of its recently expanded bond purchase program at 645 billion pounds ($774 billion).

"If needed, the MPC can expand asset purchases further," the BoE said, adding it would "guard against an unwarranted tightening in financial conditions," a nod to last week's rise in British borrowing costs as investors rushed to buy dollars. The bank has worked closely with the government which was due later on Thursday to expand on its historic decision for the British state to help pay workers' salaries by including self-employed workers.

"We think there is a good chance the BoE will end up doing more QE (bond-buying) by May, although this will depend on an assessment of the longevity of the shock nearer to the time - and the likely fiscal consequences," JP Morgan economist Allan Monks said. Monks said the government's budget deficit could balloon to 9% of GDP during the next financial year - almost as large as in the financial crisis - and the Resolution Foundation think tank said the BoE might need to step in and buy bonds directly.

"It is crucial that we plan for what happens if the situation deteriorates and the government is unable to borrow direct from markets to fund measures on the scale required to support the economy," former BoE officials James Smith and Tony Yates wrote. BoE Governor Andrew Bailey said last week that central banks historically had a strong aversion to buying debt directly from governments lest it lead to uncontrolled spending and inflation.

"The government and the Bank of England should be explicit in advance that it will only take such measures if they are temporary, transparent and accountable," Smith and Yates wrote. The BoE said that even before Britain closed most non-essential businesses on Monday, clothing stores reported "high double-digit falls in sales," consultants said clients were delaying projects and banks restricted credit to new borrowers.

"The scale and duration of the shock to economic activity, while highly uncertain, will be large and sharp but should ultimately prove temporary, particularly if job losses and business failures can be minimised," the BoE said. ($1 = 0.8338 pounds) (Writing by William Schomberg and David Milliken; Editing by Hugh Lawson)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Download The Devdiscourse News App for Latest News.



Ayurveda for COVID 19: Professionals owe the responsibility to protect it from quacks and fake news

Indian Ayurveda professionals are lagging behind their foreign counterparts in handling quacks and protecting credentials of the Ayurveda at the time of COVID 19 pandemic. The professionals of Ayurveda cannot abjure the responsibility to co...

Education post-coronavirus: Schools to rush for more digitalization

Digital education would undoubtedly boom in the post-coronavirus world, supported by educational institutions that have discovered its efficiency during the crisis, but it is still not expected to outshine traditional classroom learning....

Public health care post-COVID 19 to go for revamping, not rebooting

Until now, the economies used to classify healthcare sector under social expenditure. However, the devastation caused by COVID 19 pandemic has upgraded public healthcare on topmost priority and core economic activity for controlling future ...

Coronavirus lockdowns to speed up long-pending revamping of supply chains

With millions of production lines impacted, business disruptions to some extent are unavoidable and the lessons learned from this turbulence will leave an everlasting impact on both global and local levels of supply chains....


Latest News

US Fed to allow foreign central banks to swap debt for cash

The Federal Reserve announced a new facility Tuesday that will allow foreign central banks to temporarily swap debt holdings for US dollarsAmid the cash crunch and increased demand for dollars caused by the uncertainty around the coronaviru...

Reuters Health News Summary

Following is a summary of current health news briefs. Mainland China reports 48 new confirmed coronavirus casesMainland China reported on Tuesday a rise in new confirmed coronavirus cases, reversing four days of declines, due to an uptick i...

Huawei posts strong growth but warns 'most difficult year' ahead

Huawei on Tuesday said it had sustained solid growth in its global businesses in 2019 despite a US campaign to isolate the Chinese tech giant, but warned of its most difficult year ahead. The stark warning came as a result of stringent US s...

Reuters World News Summary

Following is a summary of current world news briefs. Mainland China reports 48 new confirmed coronavirus casesMainland China reported on Tuesday a rise in new confirmed coronavirus cases, reversing four days of declines, due to an uptick in...

Give Feedback