LONDON (AP) – The Bank of England on Thursday expressed cautious optimism about the UK’s economic outlook following a sharp drop in coronavirus infections and the rapid roll-out of the national COVID-19 vaccination program .
In a statement, the Monetary Policy Committee noted some recent “positive” economic developments as it kept the bank’s main interest rate unchanged at a record low of 0.1%. The nine committee members also voted against any further increases in the bank’s bond purchase program.
The decision to keep interest rates on hold had been widely predicted in financial markets following the improving coronavirus situation in Britain.
“COVID infection and hospitalization rates have dropped significantly across the UK and the vaccination program is proceeding at a rapid pace,” the committee said in minutes released alongside the decision. “Looking ahead, the expected easing of COVID restrictions made it likely that both supply and demand would increase in the coming months.”
The combination of coronavirus infections on the decline – new cases stand at around 5,000 per day from a peak of almost 70,000 per day in early January – and rapid vaccine rollout has raised hopes of a recovery of economic activity in the spring as foreclosure restrictions are lifted.
The turnaround is notable as Britain experienced Europe’s deadliest coronavirus outbreak, with around 126,000 dead.
The UK government, which is responsible for the lockdown in England, has charted a course to ease restrictions over the next few weeks, but insists it will be guided by “data, not dates.” The rest of the UK – Scotland, Wales and Northern Ireland – are on similar schedules to ease the lockdown.
By mid-April, the UK government hopes retailers in England selling non-essential items, such as shoes and books, can reopen. The pubs are also expected to reopen outdoors from that date, with indoor service following May 17.
The speed at which coronavirus vaccines were injected into people’s arms also bolstered the expected recovery, certainly compared to other countries in Europe. As of Wednesday, more than 25 million people in the UK had received a first dose of the vaccine, nearly half of its eligible adult population.
However, vaccine supply problems are emerging and could hamper the expected recovery. On Thursday, the UK government said scheduled vaccinations for people under 50 could be delayed for up to a month due to a supply shortage, in part due to reduced deliveries from the Serum Institute of India.
The UK economy has been one of the worst performers over the past year and remains around 10% smaller than it was at the start of 2020. Many attribute this to the Conservative government’s repeated failures to support early enough lock restrictions.
In a report released Thursday, the well-respected Resolution Foundation think tank said the delays had claimed thousands of lives and deepened the economic crisis.
âGoing timidly and late into lockdowns has been a disaster, causing several thousand preventable deaths,â said Mike Brewer, chief economist at the Resolution Foundation. “In addition, delays in restrictions have forced them to be more stringent and more durable than in other countries, further compounding the economic damage.”
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