BoE Increases Stimulus Amid Fresh Lockdown Measures
The Bank of England said it will inject an additional £150 billion ($196.29 billion) into the country’s economy as the recent increase in coronavirus infections curbs the recovery process. The bank also decided to maintain interest rates at the historic low of 0.1%.
“The Committee voted unanimously for the Bank of England to continue with the existing programme of £100 billion of UK government bond purchases, financed by the issuance of central bank reserves, and also for the Bank of England to increase the target stock of purchased UK government bonds by an additional £150 billion, financed by the issuance of central bank reserves, to take the total stock of government bond purchases to £875 billion,” the bank said in a statement.
New lockdown measures and restrictions in the country are likely to send the British economy into another slump. As support programs from the British government ease off, the country’s unemployment rate is expected to jump, according to the Bank of England.
The central bank projected the country’s economy to decrease by 2% in the final quarter of the year before starting to recover ground at the start of the new year. The Bank said it doesn’t see the British economy recovering to its pre-coronavirus levels before 2021.
The country’s policymakers estimated the British economy to decrease by 11% this year. According to the bank projections, the country’s unemployment rate will hit its peak of around 7.75% in the mid-2021.
The Bank of England said its projections reflected increased “health concerns and uncertainty about the outlook."
A Biden Win May Result in a Huge Stimulus Package
Investors are betting on stocks and gold today, a trend that is lowering the value of the US dollar as Joe Biden is now on the brink of the White House. The Democratic candidate won in both Michigan and Wisconsin and continues to wait for any sign of the presidency as news develops.
During his campaign, Biden voiced his opinions on how the stimulus package would look and published a speculative overview during his camping, named the Emergency Action Plan to Save the Economy.
The first stimulus bill, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was approved by President Trump during the first wave of the pandemic. It aimed to provide support to those financially affected by the virus. After the CARES Act was passed, the government sent out a $1,200 stimulus check to more than 160 million Americans and helped millions avoid poverty.
In March, the US Senate unanimously passed a massive stimulus package of around $2 trillion in an effort to offset the blow the country took during the pandemic. Among other things, the stimulus package included:
- Providing one-time payments of up to $1,200 for individuals and $2,400 for couples, plus $500 for each child.
- Hiking unemployment insurance by giving $600 per week for up to 4 months in addition to what recipients usually receive from states.
- Making a $500 pool billion of taxpayer money for making loans, loan guarantees, and investments to or in companies, states, and municipalities affected by the pandemic.
- Injecting $117 billion into hospitals and veterans’ health care.
- Pouring $16 billion for building a national stockpile of pharmaceutical and medical products.
- Providing $350 billion in loans that small businesses can apply for to pay out salary, wages, and benefits. The loans will be worth 250% of a worker’s monthly wage, with a maximum loan of $10 million.
- Postpone payroll taxes for employers, one half of which they have to pay by the end of 2021 and the other half by the end of 2022.
In comparison with the CARES Act, Biden’s plan for a stimulus package would include additional direct payments, but so far, the public has no information about how many or for how long these payments would be provided or if they’re in the budget.
The stimulus plan includes an additional $200 per month that would be given to Social Security recipients. According to Paul Krugman, an American Nobel Prize-winning economist, the United States needs a massive relief package.
Krugman believes a new package should be worth up to several hundred billion dollars a month to help the economy survive as coronavirus continues to hurt businesses and individuals.
Krugman emphasized that the US is still deep in the “disaster relief stage.”
“A lot of people are going to be out of work, a lot of businesses are going to be stressed. We need to just make life tolerable for them,” he added.
“We’re still 11 million jobs down from where we were before this thing hit and all of those people are without wages, state local governments are in extreme financial distress, thousands of businesses — maybe hundreds of thousands — are on the verge of collapse.”
The Bank of England said it would pour an additional £150 billion into the economy to keep it afloat as the second wave of coronavirus continues to take its toll. At the same time, the investing community waits to see if the US will follow the same path despite either candidate winning.