Pedestrians walk past the Bank of England in the City of London, Britain June 28, 2016.
Paul Hackett | Getty Images
The Bank of England on Thursday added another £100 billion to its quantitative easing program in a bid to shore up the U.K. economy amid the fallout from the coronavirus crisis.
The additional bond purchases will take the total value of the central bank’s Asset Purchase Facility (APF) to £745 billion.
The Bank resisted taking interest rates into negative territory, a decision being closely watched by investors, instead opting to hold its main lending rate steady at 0.1%. Rates have been reduced twice from 0.75% since the beginning of the coronavirus pandemic.
Sterling edged around 0.1% lower against the dollar shortly after the decision was announced, which was in line with analyst expectations. U.K. 10-year Gilt yields briefly dropped to a one-month low of 0.16% but recovered to hover at just above 0.2%.
The BOE’s latest monetary policy decision comes as the U.K. economy attempts to recover from an unprecedented 25% contraction across March and April as lockdowns forced by the pandemic hammered economic activity.
While economic data has indicated that the worst of the impact may be over, the Bank of England will also have to take into consideration the eventual unwinding of the British government’s furlough scheme, which subsidizes 80% of wages for workers furloughed as a result of the pandemic.
Economists had broadly expected the central bank to expand its bond-buying program. ING Developed Markets Economist James Smith pointed out earlier this week that the size of asset purchases sits at £598 billion at the last count, indicating that the original £645 billion target set in March could be exhausted by July.
Smith suggested that an extra £100 billion would allow the BOE to continue purchases until early September, which would mean the MPC having to top up again in August.
The U.K. remains the fifth worst affected country in the world by the pandemic, with more than 300,700 confirmed cases and more than 42,200 deaths as of Thursday morning, according to Johns Hopkins University.