Bank of England leaves interest rates alone to spur COVID-19 rebound

Sept. 17 (UPI) -- The Bank of England announced Thursday it's decided to hold interest rates steady amid ongoing hardships brought on by COVID-19.

The bank's Monetary Policy Committee said, in accordance with its 2% inflation target, it voted unanimously to keep rates at 0.1% and maintain its $960 billion quantitative easing program.

"The outlook for the economy remains unusually uncertain," the bank said in a statement. "Projections in the August ... assumed that the direct impact of COVID-19 on the economy would dissipate gradually."

The bank said its outlook is conditioned on the assumption of an "immediate" and "orderly" free trade agreement with the European Union at the start of 2021, after Britain's transition period ends. It expects the British economy to continue slow growth.

"The recovery in demand took time as health concerns were expected to drag on activity," the bank said. "The unemployment rate was projected to rise markedly, consistent with a material degree of spare capacity, before declining gradually."

Analysts say the Bank of England kept rates unchanged partly out of concern for the impact negative interest rates could have on British banks.

"We expect interest rates to be no higher than 0.10% for the next five years," Andrew Wishart, an economist at the consultancy Capital Economics, said.

The announcement by the British central bank came one day after the U.S. Federal Reserve also opted to keep interest rates unchanged. The Fed also said in a revised outlook Wednesday it expects rates to remain near zero until at least 2022.