Like many other regulators worldwide, the Bank of England continues its money-printing program in order to support the coronavirus-hit economy. Notably, the world has never seen such large volumes of the so-called “free money” printed to boost the economy as in 2020. So, the BoE keeps pumping more pounds into the financial system. The regulator will extend its already existing asset purchase program by an additional £150 billion to buy government bonds. It is still too early to assess the effect of this financial stimulus. The outlook for the UK economy remains uncertain and depends “on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom,” the BoE notes. The bank expects the UK economy to shrink by 2% in the fourth quarter of 2020 and to reach the pre-crisis levels not earlier than 2022. The possibility of implementing negative interest rates remains the key issue for the markets. According to James Smith at ING, the Bank of England has already injected £300 billion since early 2020 into the market, having increased its bond-buying scheme to £876 billion. The QE program is about to reach its limit soon, and the bank needs to expand it to effectively continue its operation.
