A meeting held today by The Bank of England’s Monetary Policy Committee (MPC) unanimously voted to keep Bank Rates at 0.1%.
The committee noted whilst the vaccination programmes will start to improve the economic outlook, the increase in Covid cases including the new strain identified and establishing again associated restrictions has affected the recent UK and global activities.
The rise in Covid cases and consequent restrictions put in place to contain further virus spreading saw GDP growth slowdown in Q4 2020.
During the UK’s first lockdown in Q2 2020 the impact on the economy is not expected to be as severe. However, GDP is expected to fall in Q1 2021 by around 4% and rise a little in Q4 to around 8% lower than Q4 2019.
Over 2021 GDP is likely to recover quickly as the vaccination programme leads to easing of Covid-related restrictions and people’s health concerns.
Over the 2nd and 3rd years of the forecast period, the MPC’s central projection see CPI inflation close to 2%.
Yet another clear signpost of inflation to come to devalue covid debt. This is is becasue despite the risk of inflation, the Bank of England has held interest rates and indeed, has written to Banking groups asking them to plan for negative interest rates within the next 6 months - this will promote even higher inflation over the next couple of years.