Managing almost one trillion pounds of government bond purchases will be a huge challenge for the Bank of England (BoE) in the wake of the pandemic, Andrew Bailey told an online conference hosted by the Association of Corporate Treasurers.
“That is substantially bigger than the Bank of England balance sheet in the past,” the central bank’s Governor said yesterday, adding “It’s necessary, it’s been done for a very, very good reason, but we have to think hard about how we manage that…. That is going to be a major issue for us.”
The BoE expanded its bond-purchase target to £895 billion last year to soften the blow to the economy from the pandemic, following its biggest contraction in 300 years. The economy has begun bouncing back after lockdown restrictions were eased but remains roughly 4% below its pre-pandemic size.
His words preceded a brief dip to 1.40 for the pound vs dollar rate, before it rebounded back to 1.41.
As expected, Boris Johnson confirmed on Monday that Covid-19 restrictions would remain in place until 19 July because of the rapid spread of the Delta variant. The prime minister is “determined” that the remaining measures will be lifted in England on that date, Downing Street has said.
Unemployment in the UK dropped for the fourth consecutive month in April as businesses hired more staff in response to the easing of lockdown restrictions, the Office for National Statistics said on Tuesday morning. The jobs market displayed further signs of recovery after non-essential shops and hospitality venues were given the green light to open outdoors throughout the UK.
The unemployment rate edged down to 4.7% in the three months to April – amounting to around 1.6 million people – in a slight improvement from 4.8% in the three months to March. The reading remains well short of initial concerns when the pandemic first emerged last year that unemployment could hit 12%, with economist’s predicting the worst recession in 300 years.
This pound to dollar rate maintained its sideways movement this morning, remaining at 1.41.
Investors look ahead to Federal Reserve meeting
The dollar slipped against the pound on Monday, but its move lower was minimal as investors look ahead to the much-anticipated US Federal Reserve monthly meeting of policymakers. The gathering of Federal Open Market Committee members could mark a change in the outlook for monetary policy. Investors will be looking to see how much the central bank has been discussing tapering its fiscal stimulus – and what the timeframe might look like once it begins.
The next set of influential data from the UK economy hits the headlines tomorrow: the Consumer Price Index and the Retail Price Index.
A slew of data is scheduled for release from the US economy today, including: Retail Sales Control for May and the Producer Price Index.