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Coronavirus
VERY HIGH Source: covid.gov.pk
Pakistan Deaths
27,524
4224hr
Pakistan Cases
1,236,888
2,06024hr
4.58% positivity
Sindh
454,510
Punjab
427,583
Balochistan
32,837
Islamabad
104,913
KPK
172,766

LONDON: The Bank of England said on Thursday it could see a modest reduction ahead in the huge support it has provided to Britain’s economy during the COVID-19 pandemic and set out how it could gradually tighten monetary policy.

For now, the central bank decided to keep its stimulus at full speed, even though it expects inflation to jump to 4.0% around the end of the year.

Only one of the BoE’s eight monetary policy-makers, Michael Saunders, voted to reduce the size of its bond-buying programme which remains unchanged at 895 billion pounds ($1.25 trillion).

The vote to hold its benchmark interest rate at a historic low of 0.1% was unanimous, as expected.

With more than 70% of adults in Britain now fully vaccinated against COVID-19 and most social-distancing rules lifted, Britain’s economy has recouped much of its 10% crash of 2020.

Bank of England mulls inflation threat

This has prompted the BoE, like other central banks around the world, to spell out how it eventually plans to rein in its stimulus.

The BoE’s rate-setting committee said “some modest tightening” of monetary policy over its three-year forecast period was likely to be necessary.

It said it would start reducing its stock of bonds when its policy rate reaches 0.5% by not reinvesting the proceeds of maturing debt, as long as that made sense for the economy.

Markets have priced in BoE rates reaching that level only in late 2023 or early 2024, after a first rate rise to 0.25% around August next year.

The BoE also said it would consider actively selling down gilt holdings when the rate reaches at least 1%.

Previous guidance, from June 2018, said the BoE would not start to unwind bond purchases until Bank Rate was near 1.5%.

Governor Andrew Bailey said much had changed in the past three years and “if we stuck with 1.5%, when you look at the market curve, that would be tantamount to saying that we would actually never reduce the ... balance sheet as things stand today.”

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