{"id":109846,"date":"2021-03-18T01:38:42","date_gmt":"2021-03-18T01:38:42","guid":{"rendered":"https:\/\/fin2me.com\/?p=109846"},"modified":"2021-03-18T01:38:42","modified_gmt":"2021-03-18T01:38:42","slug":"bank-of-england-to-keep-recovery-hopes-in-check-despite-vaccine-progress","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/bank-of-england-to-keep-recovery-hopes-in-check-despite-vaccine-progress\/","title":{"rendered":"Bank of England to keep recovery hopes in check despite vaccine progress"},"content":{"rendered":"

LONDON (Reuters) – The Bank of England will probably try on Thursday to keep a lid on expectations that Britain\u2019s economy is heading for a strong, vaccine-boosted recovery after suffering its worst crash in three centuries last year.<\/p>

FILE PHOTO: The Bank of England and Royal Exchange are reflected in a puddle as a pedestrian walks past, amid the coronavirus disease (COVID-19) outbreak in London, Britain, November 19, 2020. REUTERS\/Simon Dawson\/File Photo<\/figcaption>

The central bank is not expected to change its huge, crisis-fighting stimulus programme at 1200 GMT, after its March policy meetings.<\/p>\n

Instead, investors will be trying to gauge how confident it is that Europe\u2019s fastest COVID-19 vaccination campaign and yet more spending and tax cuts in finance minister Rishi Sunak\u2019s March 3 budget will trigger a bounce-back in the months ahead.<\/p>\n

BoE Governor Andrew Bailey said on Monday he was more optimistic about the recovery. But he stressed his view came \u201cwith a large dose of caution\u201d with Britain still in the grip of a third lockdown and facing the risk of new COVID-19 variants.<\/p>\n

The health service warned on Wednesday of a big reduction in available vaccines from March 29.<\/p>\n

Bailey also said a jump in interest rates in financial markets – from almost record-low levels – was consistent with the better outlook, suggesting he was not worried about investors pricing in BoE rate hikes starting next year.<\/p>\n

On Wednesday, rate futures markets saw an 80% chance of a single increase in Bank Rate to 0.25% by September 2022 from its current all-time low of 0.1%.<\/p>\n

Sterling has been the second-strongest performer against the U.S. dollar this year among the so-called G10 currencies.<\/p>\n

But Deutsche Bank economist Sanjay Raja said speculation that the BoE might raise interest rates before the U.S. Federal Reserve looked misplaced.<\/p>\n

\u201cWhile the timing of any unwinding of policy support remains highly uncertain, the UK sits well behind the U.S. in both growth and inflation expectations,\u201d Raja said.<\/p>\n

At the end of 2020 Britain\u2019s economy was 92% of its size a year earlier. The U.S. economy was 98% of its pre-pandemic size.<\/p>\n

The Federal Reserve again pledged on Wednesday to keep rates near zero at least until 2023 even as it forecast a sharp jump in economic growth and inflation in 2021.<\/p>\n

Another factor likely to slow any rate hike by the BoE is finance minister Sunak\u2019s plan for tax hikes and spending curbs, after his new, short-term public spending boost and tax cuts.<\/p>\n

Investors will be watching Thursday\u2019s BoE statement for any signs that it is preparing to raise once again its 895 billion-pound bond-buying programme to help the economy in its recovery.<\/p>\n

On the other hand, the BoE might signal that it will pare back the pace of the programme in order to stretch it over 2021.<\/p>\n

That would be seen as one of the first moves by a top central bank to slow the pace of stimulus.<\/p>\n

The debate marks a sharp turnaround from the start of 2021 when investors were betting on the possibility of the BoE resorting to negative interest rates to revive the economy.<\/p>\n

Some members of the nine-strong Monetary Policy Committee have sounded more worried than Bailey about a weak recovery which they have said could yet justify negative rates later this year, once banks have had time to prepare.<\/p>\n

Only BoE Chief Economist Andy Haldane has sounded the alarm about an inflation \u201ctiger\u201d.<\/p>\n

The BoE will also use this week\u2019s meetings to check its assumption that new post-Brexit trading arrangements that began on Jan. 1 would reduce GDP this quarter by 1%.<\/p>\n

($1 = 0.7201 pounds)<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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