Bank of England to release economic forecast as deaths spike
The Bank of England (BOE) will today release a reassessment of the UK’s pandemic-induced economic slump.
A revised rate decision—the BOE benchmark currently stands at a record-low 0.1%—will be accompanied by an interim Financial Stability Report and the first formal economic forecasts since the start of the domestic outbreak. Although the BOE is already on track to meet its bond-buying goal by late June, the need for massive public debt absorption could boost support for additional quantitative easing (QE).
The QE decision represents a precarious crossroads for the UK, which could see a second quarter contraction of more than 10%. The prospect of further easing, despite a record $250 billion allocation in March, highlights the UK’s extraordinary cash predicament. Blurred lending lines could threaten the BOE’s operational independence, and some worry the program could fuel the risk of rapid future inflation.
Expect the decision to preclude further rate manipulation, although asset purchasing targets will likely be raised in June and August. Today’s events indicate possibly imminent volatility in the pound sterling, which could be boosted by a QE budget expansion or sunk by dismal forecasts. Cautious investor sentiment on the public debt front could boost borrowing costs and prolong what could be the worst downturn in a century.
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