By Ashley Young-
The Bank of England has warned that the UK economy is heading towards an unprecedented recession, its sharpest on record.
The Uk economy shrink 14% this year, based on the hypothetical presumption of the lockdown being relaxed in June.
Mr Bailey warning is based on an expected caution from consumers even after the lockdown is lifted. He said: “Not all of the economic activity comes back. There’s quite a sharp recovery. But we’ve also factored that people will be cautious of their own choice.
“They don’t re-engage fully, and so it’s really only until next summer that activity comes fully back.”
The news follows a vote by policymakers to keep interest rates at a record low of 0.1%. However, the Monetary Policy Committee (MPC) that sets interest rates was split on whether to inject more stimulus into the economy.
The Bank’s analysis, published on Thursday is based on the assumption that social distancing measures are gradually phased out between June and September.
Its latest Monetary Policy Report showed the UK economy plunging into its first recession in more than a decade. The economy shrinks by 3% in the first quarter of 2020, followed by an unprecedented 25% decline in the three months to June.
The Bank said the housing market had come to a standstill, while consumer spending had dropped by 30% in recent weeks.