The Bank of England (BoE) has announced it is maintaining its base interest rate at 0.1%.

The Monetary Policy Committee (MPC) voted unanimously for the Bank to continue with its existing programmes of UK government bond and sterling non-financial investment-grade corporate bond purchases.

The BoE stated that these programmes will still be financed by the issuance of central bank reserves, maintaining the target for the total stock of these purchases at £745bn.

Estimates suggest that UK GDP is expected to have been over 20% lower in the seance quarter of 2020 than in 2019’s final quarter, although in the MPC’s central projection, the Bank stated that GDP “continues to recover” beyond the near-term – as social distancing eases and consumer spending picks up. 

“The Bank now forecasts that UK GDP will return to its 2019 levels by the end of next year, meaning it’s expecting two lost years of growth for the UK,” AJ Bell personal finance analyst, Laura Suter, commented.

“It’s buoyed by the fact that people are getting out and spending more, no doubt fuelled by the summer holidays and lots of people staycationing, while Rishi Sunak’s stamp duty giveaway has also put the rocket boosters under the housing market, with the Bank saying it has returned homebuying to near-normal levels.

“However, the Bank paints a bleaker picture on the outlook for employment and business spending and cautions that the UK’s future is ‘unusually uncertain’ thanks to the continued spread of coronavirus. What’s more, it expects inflation to fall back after a rise in July and hover around the 0.25% mark later this year.

“Worries about a second wave of COVID-19 mean the economic outlook is particularly uncertain and that negative interest rates can’t be ruled out. Any rate rise is miles away and savers will continue to see paltry returns on their cash.”

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