The Bank of England will pump an extra £100bn into the UK economy to help fight the “unprecedented” coronavirus-induced downturn.
Bank policymakers voted 8-1 to increase the size of its bond-buying programme.
However, they said there was growing evidence that the hit to the economy would be “less severe” than initially feared.
The Bank’s Monetary Policy Committee (MPC) also kept interest rates at a record low of 0.1%.
The move comes just days after Bank governor Andrew Bailey said policymakers were ready to take action after the economy suffered its biggest monthly contraction on record.
The Bank said more recent indicators suggested the economy was starting to bounce back.
Minutes from the MPC’s June meeting said: “Payments data are consistent with a recovery in consumer spending in May and June, and housing activity has started to pick up recently.”
However, it warned that the outlook for the economy remained uncertain.
The minutes added: “While recent demand and output data had not been quite as negative as expected, other indicators suggested greater risks around the potential for longer-lasting damage to the economy from the pandemic.”
Scenarios drawn up by the Bank suggested the economy could shrink by 25% in the three months to June.
However, the MPC said more recent evidence suggested the contraction would be less severe.
The extra monetary stimulus – known as quantitative easing (QE) – will raise the size of the Bank’s asset purchase programme to £745bn.
Policymakers said the injection would help to support financial markets and underpin the recovery.
However, Andy Haldane, the Bank’s chief economist, voted against the increase.
He said the recovery was happening “sooner and materially faster” than the Bank expected in May.
Slow recovery
Policymakers said the jobs market was likely to remain weak for some time, with a risk of “higher and more persistent unemployment”.
Millions of workers have already seen their pay packets shrink as a result of lower pay for furloughed employees. A survey by the Bank said other companies had postponed or cancelled pay rises this year.
Mr Bailey said: “Even with the relaxation of some Covid-related restrictions on economic activity, a degree of precautionary behaviour by households and businesses is likely to persist. The economy, and especially the labour market, will therefore take some time to recover towards its previous path.”
Mr Bailey said weak inflation had been by driven by falling oil and energy prices, as well as a global drop in economic activity.
The Bank expects inflation to return to target within two years.
The Bank of England has increased its support for the economy, despite it assessing that the outlook is not quite as awful as its scenario last month. The economy is on course for a hit in the second quarter of about 20% compared with the final three months of 2019. That’s still historic, and off the scale, but not quite as extreme as the 27% it predicted in May.
The extra £100bn of purchases of government bonds also has the air of an insurance policy.
Most of the MPC were concerned about a couple of factors, A less awful outlook does not mean the recovery will be quick. This is for two reasons stretching beyond economics.
There is a fear that the “prevalence of the virus” in the UK will mean that Britons will continue to socially distance, voluntarily, holding back the recovery more than other nations (Germany would be an example).
Related to that was the idea that more QE now could mitigate the economic impact of “higher rates of Covid-19 infection going forward” – a second wave.
So the news is still bad, but less awful. But risks beyond the purely economic led to more billions being injected into the economy.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
