Bank of England sees recovery signs but stresses outlook still unclear

LONDON (Reuters) – The Bank of England said there were signs that Britain’s economy was recovering from its COVID-19 slump but it stressed the outlook remained unclear, dampening speculation the central bank might move quickly to tighten policy.

FILE PHOTO: The Bank of England and Royal Exchange are reflected in a puddle as a pedestrian walks past, amid the coronavirus disease (COVID-19) outbreak in London, Britain, November 19, 2020. REUTERS/Simon Dawson

“Since the Monetary Policy Committee’s previous meeting, the news on near-term economic activity had been positive, although the extent to which that news changed the medium-term outlook was less clear,” the BoE said after its March policy meeting.

“Different MPC members placed different weights on the balance of risks around the outlook.”

The easing of COVID restrictions could be lifted “somewhat more rapidly” than the BoE had thought last month, it said.

Sterling dipped against the U.S. dollar and the euro and British government bond prices rose slightly as investors took the announcement as a sign that the BoE was in no rush to start dialling back on its stimulus programmes.

As expected, the BoE kept its stimulus programme unchanged ahead of the expected recovery in Britain’s economy later this year, helped by the fast roll-out of the country’s COVID-19 vaccination programme.

The BoE kept its benchmark interest rate at an all-time low of 0.1%, in line with forecasts in a Reuters poll of economists.

The central bank also left unchanged the size of its 895 billion-pound ($1.25 trillion) bond-buying programme.

The BoE said it planned to keep the pace of its purchases of British government bonds steady at around 4.4 billion pounds per week, but it said it could slow the pace in the future.

“The Committee continued to envisage that the pace of purchases could remain at around its current level initially, with flexibility to slow the pace of purchases later,” it said.

($1 = 0.7157 pounds)

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