The resurgence of coronavirus across Europe is likely to slow the UK’s economic recovery which had been exceeding expectations, the Bank of England’s rate setting committee said after its September meeting.
Voting unanimously to hold interest rates at 0.1 per cent and the level of quantitative easing at £745bn, the Monetary Policy Committee on Thursday issued a warning that Covid-19 and an antagonistic end to the Brexit transition period threatened the UK economy.
If there was a downturn, the BoE indicated that it was more likely than before to impose negative interest rates, with central bank officials briefing the MPC on how pushing interest rates below zero would work in practice.
Sterling declined on the evidence that the BoE was closer to pressing the button on imposing negative rates in a future downturn, losing the 0.6 per cent gains it had made earlier in the day.
Commenting on the UK economic outlook, the MPC said: “The recent increases in Covid-19 cases in some parts of the world, including the United Kingdom, had the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year”.
This was likely to weaken a recovery, which had been faster than the BoE expected in its early August meeting. Referring to the…