LONDON: The Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain’s economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.
The BoE kept its benchmark interest rate at an all-time low of 0.1 per cent and the total size of its bond-buying programme unchanged at 895 billion pounds ($1.24 trillion), as expected by economists polled by Reuters.
The central bank said it would slow its bond-buying to 3.4 billion pounds a week, down from its current pace of 4.4 billion pounds a week.
“The expected completion point of the purchase programme remained unchanged. This operational decision should not be interpreted as a change in the stance of monetary policy,” the BoE said.
So far, most central banks in rich countries around the world have stressed they are in no hurry to scale back huge the amounts of support they have provided for their economies.
But the Bank of Canada said last month it could start to raise rates by late 2022 and it pared back its bond-buying.
Sterling initially fell on the announcement but was up 0.2 per centagainst the U.S. dollar at 1112 GMT and it also recovered against the euro.
The central bank’s chief economist Andy Haldane, who has warned of a possible jump in inflation, cast a lone vote to cut the size of the bond-buying programme by 50 billion pounds.
The BoE raised its forecast for British economic growth in 2021 to 7.25 per cent from a previous estimate of 5.0 per cent made in February.
The increase reflected a smaller-than-feared hit from a third coronavirus lockdown which began in January and the extension of higher public spending and tax cuts announced by finance minister Rishi Sunak in March.
The BoE said it now expected unemployment to rise only slightly to a peak of almost 5.5 per cent in the third quarter of this year, when Sunak’s jobs protection programme is due to expire.
But it lowered its projection for growth in 2022 to 5.75 per cent from its previous estimate of 7.25 per cent.
The BoE also said the economy was set to return to its pre-pandemic size in the last quarter of 2021, a bit earlier than its February projection of the first quarter of 2022.
It forecast consumer price inflation to be fractionally below its 2 per cent target in two years’ time, based on expectations in financial markets which saw Bank Rate at 0.3 per cent at that point. ($1 = 0.7193 pounds)