Experts predict Bank of England will ramp up its money-printing programme to almost £1trillion over the next year
Making plans: Bank of England boss Andrew Bailey
The Bank of England looks likely to ramp up its money-printing programme to almost £1trillion over the next year, experts are predicting.
The Bank’s Monetary Policy Committee (MPC) is expected to add another £100billion to the so-called quantitative easing (QE) stimulus package when it meets this month.
But that won’t be the end of it, according to analysts at Capital Economics, who expect the Bank to spend £350billion on QE in total at intervals over the next 12 months.
That would take its programme to £995billion, almost half the size of the UK economy. QE involves the Bank buying government and corporate debt, effectively creating money which is injected back into the economy.
As the UK faces its worst recession for 300 years due to the coronavirus crisis, the Bank has already increased its bond-buying programme by £200billion. And yesterday the European Central Bank bumped its equivalent scheme by another €600billion, to €1.35trillion.
The Bank of England’s concerns over the state of the economy were evident in a letter sent by Sam Woods, chief executive of the its regulatory arm, to UK lenders yesterday.
He told the chief executives of all the banks that he would be collecting data from all of them – ahead of their second-quarter earnings announcements – on the losses they were expecting to book due to loans turning sour.
The Bank fears loan losses could reach £80billion. And the Office for Budget Responsibility (OBR) warned that hundreds of thousands of loans which banks are handing out under Government-backed coronavirus aid schemes will never be repaid – costing the taxpayer £5billion this year alone.
In another sign the Bank is on high alert, deputy governor Sir Jon Cunliffe wrote to so-called financial market infrastructure firms – such as payment processors Visa and the London Stock Exchange’s clearing house – warning they must not pay any dividends to investors without the sums first being cleared by officials.
The Bank has already ordered major banks not to pay dividends, so they can hold on to cash to help support their customers through the economic slump.
And in a speech given at a Bloomberg event, the Bank’s executive director of markets Andrew Hauser revealed its emergency response to the coronavirus crisis was being drawn up as Mark Carney was handing over the governor’s role to Andrew Bailey.
The two governors were hammering out the Bank’s response ‘with the removal vans waiting outside’, he said.
Since most of the staff have been working from home during lockdown, he added, they are making more than 12,000 audio and video calls every day.