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Bank of England keeps interest rates unchanged, expects slower recovery

Bank of England keeps interest rates unchanged, expects slower recovery

Mubasher: The Bank of England (BoE) maintained interest rates steady, but warned that the economy could take longer to recover from the coronavirus (COVID-19) crisis, CNBC reported on Thursday.  

The Monetary Policy Committee decided to leave the benchmark lending rate unchanged at 0.1% after cutting rates twice from 0.75% since the beginning of the COVID-19.

The committee also voted against extending its bond-purchasing levels, keeping the size of its bond-buying programme at GBP 745 billion.

Nonetheless, the BoE said that the UK economy is unlikely to exceed its pre-COVID levels until the end of 2021.

Previously, the central bank expected the gross domestic product (GDP) to return to the level of the fourth quarter of 2019 in the second half of 2020.

According to policymakers, the UK’s GDP is expected to contract by 9.5% in 2020, compared to a previous forecast of 14% in May, before rebounding by 9% in 2021 and expanding by 3.5% in 2022.

The BoE said that the economic recovery will “depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these factors.”