By David Milliken and Andy Bruce
LONDON (Reuters) – The Bank of England said growth in Britain’s economy this year would be the highest since World War II and slowed its $ 1 trillion bond buying program, but stressed that it would not will reverse your stimulus.
Governor Andrew Bailey welcomed the prospect of a faster-than-previously anticipated recovery as the country advances vaccination against the coronavirus and decreases unemployment.
But he also said that there is still a big gap compared to the pre-pandemic economy.
“Let’s not get carried away,” Bailey said of the better prospects. “It brings us by the end of this year to the level of production that we had essentially at the end of 2019, before COVID.”
The Bank of England raised its forecast for British economic growth in 2021 to 7.25% from the February estimate of 5.0%.
The fastest annual growth since 1941, when Britain was rearming, would occur after production plummeted 9.8% in 2020, the biggest drop in more than 300 years.
In addition to vaccines, the rise in growth prospects reflected a less-than-feared impact from the third coronavirus lockdown – which began in January – higher public spending and tax cuts announced in March.
The economy is expected to return to its pre-pandemic size in the final quarter of 2021, three months earlier than had been forecast, said the BoE, which, however, lowered its growth forecast for 2022 to 5, 75% from its previous estimate of 7.25%.
With the economy on the way to recovery, the Bank of England said it would reduce the number of bonds it buys each week to 3.4 billion pounds ($ 4.7 billion), up from 4.4 billion pounds today.
“This operational decision should not be interpreted as a change in monetary policy bias,” he said.
So far, most central banks in rich countries have stressed that they are in no rush to reduce the enormous economic support provided by the pandemic.
But the Bank of Canada said last month that it could start raising rates in late 2022 and reducing bond purchases.
“While the Bank of England is clearly more positive about the UK economy in the short term, the Monetary Policy Committee also has significant uncertainties about the long term outlook and is apparently in no rush to tighten monetary policy,” Howard said Archer, an economist at EY Item Club.
The central bank kept its benchmark interest rate at a record low of 0.1% and the total size of its bond purchase program unchanged at £ 895 billion, as economists polled by Reuters expected.
Bank of England chief economist Andy Haldane, who warned of inflation risks, cast a lone vote in favor of cutting the bond-buying scheme by £ 50 billion. Haldane will leave the bank in June.
(Report from the UK office; Edited in Spanish by Javier López de Lérida)