Bank of England holds rates steady as UK navigates second wave fears and Brexit talks

The Bank of England on Thursday held interest rates steady and maintained its existing level of asset purchases, as investors watched for signs that it is anticipating a slower economic recovery.

The main lending rate was kept at 0.1%, with the central bank having cut rates twice from 0.75% since the beginning of the coronavirus pandemic.

The Monetary Policy Committee (MPC) opted against extending its bond-buying program, having announced an additional £100 billion ($131.4 billion) expansion in June which took the total value of the Asset Purchase Facility (APF) to £745 billion.

The central bank will instead wait to see the extent of an anticipated surge in unemployment in the fall. The U.K. is set to end its furlough scheme in October, which has partially subsidized wages for 9.3 million furloughed workers during the pandemic. Economists have suggested that many of these workers are unlikely to be reabsorbed into the jobs market.

Like many of Europe’s major economies, the British government has been forced to reintroduce some restrictions on travel and social activity in recent weeks amid fears of a second surge in coronavirus cases, while a new localized lockdown has been announced in the Scottish city of Aberdeen.

Alongside the pandemic, the U.K. is also navigating tense discussions with EU leaders in a bid to hammer out a new trading relationship. Should talks fail, the U.K. would face a sudden exit from its transitional period without a trade agreement at the end of the year, a scenario widely expected to compound the economic damage caused by the pandemic. The next round of talks is set to commence on August 17.

Originally published on CNBC

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