The Bank of England has warned that the rising rate of coronavirus infections and a lack of clarity over the UK’s future trade relationship with the EU could threaten the economic recovery.
It said much of output lost during lockdown had been recovered but the outlook remained “unusually uncertain”.
The UK is still in a deep recession, while Covid-19 infections are at their highest level since mid May.
Citing the uncertainty, the Bank held interest rates at 0.1%, a historic low.
It added that it would continue its monetary support for the economy, but stopped short of increasing its bond-buying programme or reducing interest rates further.
What are interest rates?
If you borrow money you usually have to pay a small fee set by the person lending to you. How high that fee – or interest rate – is depends on a “base rate” that is set by the Bank of England at meetings throughout the year.
The rate determines how much banks have to pay to borrow money, and that has a knock-on effect on how much the bank charges consumers to borrow.
When the economy is growing quickly the Bank tries to stop it overheating by raising interest rates, making it more expensive to borrow.
When the economy is sluggish, cutting the Bank’s base rate lowers the cost of borrowing and can encourage businesses and consumers to spend more.
The Monetary Policy Committee (MPC), which sets interest rate policy, said previous projections of economic recovery were “on the assumption of an immediate, orderly move to a comprehensive free trade agreement with the European Union on 1 January 2021”.
Economic recovery would also depend on the evolution of the pandemic and measures taken to protect public health, the MPC said.
“The recent increases in Covid-19 cases in some parts of the world, including the United Kingdom, have the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year,” it said.
The government has had to impose new social distancing restrictions across England, as rising cases have forced many areas into local lockdowns.
The Bank of England said despite a stronger than expected recovery in the last few months, the economy was still about 7% smaller than at the end of last year.
Usually if the economy is not growing strongly enough, the Bank of England considers lowering interest rates to encourage firms to invest and savers to spend.
However, interest rates are already close to zero after two emergency rate cuts in March.
Minutes from this month’s meeting show that the MPC discussed the use of negative interest rates to stimulate the economy. Last month, the Bank’s governor, Andrew Bailey, appeared to rule that out, though he said negative interest rates remained in the “tool box”.
If interest rates are negative the Bank of England charges for any deposits it holds on behalf of the banks. That encourages banks to lend the money to business rather than deposit it.
The Bank also signalled that it had no intention of raising interest rates until “significant progress” had been made in getting inflation back to the Bank’s 2% target. It is currently at a five-year low of 0.2%.
The Bank said it did not expect inflation to return to target levels for another two years.
“We expect interest rates to be no higher than 0.1% for the next five years,” said Andrew Wishart, UK economist at Capital Economics.
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.
