The Bank of England Injected an Additional $125 Billion in Stimulus
On Thursday, the Bank of England announced it was injecting an additional $125 billion on monetary stimulus to boost financial markets impacted by the coronavirus pandemic, according to Markets Insider.
The UK central bank has now grown its total amount of asset purchases to $934 billion. Furthermore, bank officials unanimously voted to keep its bank rate at 0.1 percent. "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."
Turner also believes that banks might increase lending to help boost the economy. Concerns about negative rates will persist as the world gets used to Brexit. "A further top up is quite likely later in the summer," said Rupert Thompson, chief investment officer at wealth management firm Kingswood. The UK's statistics authority reported that inflation dropped to a four-year-low of 0.5 percent in May as fuel and retail goods prices decreased, 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 rate," said Craig Erlam, a senior market analyst at OANDA.
The UK economy shrunk more than 20 percent in April and jobless claims spiked in May. The central bank is being tasked with difficult decisions to keep the economy afloat.