The UK is going through the deepest economic recession in centuries, but even that might not be enough to force the Bank of England to adopt negative interest rates.
Britain, which has the highest COVID-related death toll in Europe, implemented its lockdown measures in mid March. The restrictive measures hit entire sectors, which already suffered amid the Brexit uncertainty.
A Reuters poll found out that the country’s gross domestic
product (GDP) might contract 17.5% in the three months to June, a more
catastrophic figure than the 13.1% contraction predicted in April. In a
worst-case scenario, the GDP would tumble 22.5% this quarter.
The good news is that the recovery will likely be stronger
than initially thought as growth is expected to surge to 11.9% in the three
months to September.
Samuel Tombs at Pantheon Macroeconomics commented:
“Daily data on motor vehicle
journeys and energy consumption, alongside weekly data on retail sales, show
that the economy hit rock-bottom in early April and has begun to recover in May.”
The median of more than 70 economists polled by Reuters
showed that Britain’s economy would contract 7.7% in 2020, and the growth 5.2%
in 2021.
While the Bank of England has cut the interest rate to a
record low at 0.10% and boosted its quantitative easing programme. However, the
central bank is very cautious about implementing negative rates. The survey
suggested that rates will remain unchanged until 2022.