Bank of England says economy will take time to heal

LONDON (AP) — The Bank of England predicted Thursday that the economic downturn in the United Kingdom economy might be less severe than it thought at the start of the COVID-19 pandemic - even as it warned it would take a longer time to heal the scars.

The central bank opened the door to providing more monetary stimulus as Britain reopens after the pandemic lockdowns and said the economy probably won’t return to pre-pandemic levels until the end of 2021 as spending by consumers and businesses remains weak.

It also expressed concern about rising rates of unemployment - particularly at a time in which no one knows what will happen next.

“The outlook for the UK and global economies remains unusually uncertain,″ the bank said in a statement.

“It will depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these.″

The central bank’s Monetary Policy Committee kept its benchmark interest rate at a record low 0.1%. It also kept its target for buying government and corporate bonds - by which it injects money into the economy - at 745 billion pounds ($980 billion).

The decisions on rates and economic stimulus were widely expected as the uncertainty over the pandemic could require more action later, economists say.

UK GDP probably shrank by 23% in the second quarter, though a recovery is already underway, the bank said.

The economy will likely contract 9.5% for 2020 as a whole, before expanding 9% in 2021 and 3.5% in 2022, according to the bank’s forecasts.

The figures are more optimistic than its predictions issued in May for a 14% drop in the economy this year.

Still, Bank of England Governor Andrew Bailey suggested much was not straightforward.

Follow The Gleaner on Twitter and Instagram @JamaicaGleaner and on Facebook @GleanerJamaica. Send us a message on WhatsApp at 1-876-499-0169 or email us @onlinefeedback@gleanerjm.com or editors@gleanerjm.com.