Bank of England promised to strengthen its bond purchasing program if necessary

The Central Bank of England (BoE) has refrained from taking new action to prevent the UK economy from falling into a long recession due to the coronavirus crisis but said it is ready to further strengthen its bond repurchase program if necessary.

The BoE, like other central banks in the world, has been quick to take emergency measures twice since the start of the month after governments shut down large portions of the economy.

Today, the bank announced that it has not yet been able to accurately estimate the size of the impending growth spurt.

The Central Bank of England kept its key interest rate at a record low of 0.1% and retained the size of its recently expanded debt repayment program, consisting mainly of UK government debt and some corporate bonds, worth 654 billion GBP (774 billion USD).

“If necessary, the Monetary Policy Committee may further expand asset purchases”, announced the Boe after a committee meeting. “The committee will continue to monitor the situation closely and, depending on its development, is ready to react as necessary to prevent unjustified tightening of financial conditions and to support the economy”, added the bank.

Faced with the prospect of the deepest recession in the UK in a century, the BoE launched two exceptional declines in key interest rates earlier this month and strengthened its bond repurchase program by a record 200 billion GBP.

It is working in close cooperation with the government, which is expected to announce today its successive stimulus measures to prevent rising unemployment and expand state aid for wages to include self-employed workers.

“The magnitude and duration of the turmoil on the economy, while uncertain, will be large and sharp, but ultimately temporary, especially if the job losses and bankruptcies of companies are minimized”, the BoE noted.

The value of UK government bonds declined slightly after the announcement of the decision, but soon resumed its strong growth for the day. Yields on 10-year British Treasuries have shrunk to their lowest level since March 16, up 0.39%, down 5 basis points since the beginning of the day.

Finance Minister Rishi Sunak is expected to explain later today how he plans to support the five million self-employed people in Britain during the crisis.

Yesterday, it was reported that nearly half a million people had applied for social assistance in the last nine days, heightening fears of a big jump in unemployment.

Last week, Sunak took a historic step by announcing that the British state would pay 80% of the salaries of private-sector workers, some 28 million, in an attempt to curb the expected rise in unemployment.

The Times reported that Rishi Sunak plans to help about 2 million self-employed individuals by transferring money directly into their bank accounts. Monthly payments are expected to have a ceiling and target lower-income people, the publication adds.

The BoE Governor Andrew Bailey and other bank officials said they would not send the prime interest rate into negative territory because it would hurt lending.