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Bank of England boosts bond buying by £150 billion as new coronavirus lockdown begins

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A woman wearing a protective face mask crosses the road in front of the Bank of England in what would normally be the morning rush hour in the City of London on March 17th, 2020. The financial district of the UK is unusually quiet after the government requested people to refrain from all but essential travel and activities yesterday.

Jonathan Perugia

The U.K.’s central bank on Thursday held interest rates steady as England enters a fresh period of national lockdown measures expected to hit the country’s economic recovery.

Along with maintaining its main lending rate at 0.1%, the Bank of England’s (BOE) Monetary Policy Committee (MPC) also voted to expand its target stock of asset purchases to £895 billion.

Last month, the BOE asked British banks about their preparedness for negative interest rates, having revealed in September that it was exploring the possibility of taking rates below zero if necessary.

Since the onset of the coronavirus pandemic in March, the Bank has cut rates twice from 0.75% to 0.1%.

The British economy grew 2.1% in August, according to figures released last month by the Office for National Statistics, having suffered an unprecedented 19.8% contraction in the second quarter during the height of nationwide lockdown measures.

The BOE on Thursday projected that 2021 GDP (gross domestic product) will grow 7.25%, revised down from the +9% anticipated at its August meeting. In 2022 however, GDP is expected to grow 6.25% versus the 3.5% seen in August.

With cases spiking in the country once again, Prime Minister Boris Johnson’s government has announced a new lockdown, running in England from Thursday to December 2. On Wednesday, 492 people died in the U.K. from Covid-19, the highest daily death toll since May 19, while 25,177 new cases were confirmed.

The government has also extended its furlough scheme to support sidelined workers, with the BOE now expecting unemployment to peak at 7.75% in the second quarter of 2021.