The Bank of England injects another $125 billion to boost markets taking its total stimulus plan to almost $1 trillion

The Bank of England injects another $125 billion to boost markets taking its total stimulus plan to almost $1 trillion
  • The Bank of England said on Thursday it would inject another $125 billion in monetary stimulus to shore up distressed financial markets, taking its total quantitative easing programme to $934 billion.
  • The bank kept its interest rate unchanged at a record low of 0.1% in an effort to steady the economy at a historic peak of recession.
  • "A further top up is quite likely later in the summer," according to one chief investment officer at an asset management firm.
  • With the UK economy shrinking by 20% in April and further job losses in May, the central bank is facing intense pressure to do more to shore up the economy.
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The UK's central bank said on Thursday it would add another £100 billion ($125 billion) of monetary stimulus to boost financial markets impacted by the coronavirus pandemic, taking its total stock of asset purchases to £745 billion ($934 billion).

The Bank of England said it voted unanimously to maintain its bank rate at 0.1% at its monetary policy meeting held on Wednesday, while the Monetary Policy Committee voted 8-1 to boost its quantitative easing programme. The only dissenter was Chief Economist Andy Haldane.

The released minutes of the meeting showed no indication of discussions related to lowering interest rates into negative territory, although these are subject to the bank's ongoing review.


Analysts widely expected rates to be held at current levels.

"However, speculation of changes to the base rate, with the potential of negative rates, refuses to go away - this genie is going to be very hard to get back into the bottle now that it has been released," said Dean Turner, Economist at UBS Global Wealth Management.

"At this stage, we don't believe the Bank will take rates lower this summer, let alone into negative territory."


Some evolution in funding schemes for banks to support further lending to the economy may be seen, Turner continued. He expects concerns related to potential negative rates to continue alongside an "overdone" Brexit, and sees the pound strengthen against the weakening dollar later this year.

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Some even expect a further boost in the bank's bond-buying.


"A further top up is quite likely later in the summer," said Rupert Thompson, chief investment officer at wealth management firm Kingswood.

Data released this week by the UK's statistics authority showed inflation dropped to a four-year-low of 0.5% in May as prices for fuel and other retail good continued to fall, dragging down the consumer price index.

The upside is that Bank of England officials "believe the economic outlook has improved since the May inflation report and that conditions have improved allowing them to conduct purchases at a slower rat," said Craig Erlam, a senior market analyst at OANDA.


With the UK economy shrinking by more than 20% in April and a spike in jobless claims in May, the central bank is under immense pressure to continue its influx of a high level of monetary stimulus.

Previously, the British government had announced £330 billion ($414 billion) of bank loans to support businesses that were faced with distress or about to go bankrupt at the peak of the outbreak.

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