BOE to Counter Double-Dip Contraction Risk With Fresh Stimulus
Comment of the Day

November 02 2020

Commentary by Eoin Treacy

BOE to Counter Double-Dip Contraction Risk With Fresh Stimulus

This article by David Goodman and Lucy Meakin for Bloomberg may be of interest to subscribers. Here is a section:

The Bank of England looks certain to fire another burst of monetary stimulus this week as new coronavirus lockdowns leave the economy facing a third quarter of decline in 2020.

Any doubt that Governor Andrew Bailey and his colleagues might delay boosting their bond-buying program when they meet this week was effectively erased with Prime Minister Boris Johnson’s announcement of a month long closure of non-essential shops and hospitality venues in England.

That’s changed the outlook for the last three months of the year, forcing several economists to revise their forecasts. Output fell in the first half before starting to recover, though the BOE estimates it was still about 10% below its 2019 level at the end of the third quarter.

In a survey last week, analysts predicted the BOE will increase quantitative easing by 100 billion pounds ($129 billion) to 845 billion pounds. That’s almost double the level at the start of the year, and would be the fourth round of monetary easing since the crisis started.

Eoin Treacy's view

Many European countries have taken the decision to lock down now, so they can open up again at the beginning of December. The hope is that the Christmas shopping season can be saved. What is receiving less commentary is the cost of these measures.

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