The Bank of England has held interest rates at 0.1% as it anticipates a slower recovery from Coronavirus. The monetary policy committee voted unanimously to keep rates where they are.
The Bank says the outlook for the UK and global economies remains “unusually uncertain”. In May it said the UK economy should fully recover by next summer but now anticipates this will not happen until the end of 2021 – expecting 2 years of lost growth for the UK economy.
UK GDP is expected to have been over 20 per cent lower in Q2 2020 than in Q4 2019. However, data suggests spending has recovered significantly since the low-point of April.
Housing market activity appears to have returned close to normal levels and unemployment has not increased due to the furlough scheme. People are starting to get out more and spending more, fuelled by the summer holidays and lots of people holidaying in the UK. Chancellor Rishi Sunak’s stamp duty giveaway has also helped the housing market, with the Bank saying it has returned homebuying to near-normal levels.
There is a less promising picture when it comes to the outlook for employment and business spending and reasons that the UK’s future is ‘unusually uncertain’ thanks to the continued spread of the Coronavirus. It also expects inflation to fall after a rise in July, and hover around the 0.25 per cent mark later this year.
Any rate rise is a long way off and savers will continue to see very low, if any, returns on their cash savings.
7th August 2020