Bank of England set to reload bond-buying programme with £100bn
The Bank of England is expected to announce a further £100bn for its bond-buying programme when it meets next week in order to limit the damage to the UK economy by the coronavirus crisis.
The central bank has already spent the majority of the record £200bn expansion to its asset purchase programme which it made in March.
Although the BoE has reduced interest rates to an all-time low of 0.1 per cent when the lockdown measures were announced, it has not been willing to follow other central banks in setting negative rates.
As a result of the decision, the BoE’s main tool for stymying the looming recession is its bond-buying programme.
Economists are predicting that the bank will announce the extension to the facility when the Monetary Policy Committee (MPC) meets next week.
An extension of £100bn would mean the BoE could maintain its current pace of bond-buying until August, when the MPC will meet again.
Some think a larger increase is in the offing, including Cathal Kennedy of RBC Capital Markets, who is predicting a £200bn rise.
He said that such a move would be in line with the BoE’s tendency to buy more bonds than the government is planning to sell.
But a move of this size could lead to further claims that the central bank has sacrificed its independence to back the government’s huge spending increases.
BoE governor Andrew Bailey has however hit back at claims that it committed to so-called “monetary financing”, the permanent expansion of its balance sheet to fund the government.
Next week’s MPC meeting will follow economic data that is expected to show that the UK’s GDP declined 20 per cent in April at the height of the lockdown.