Bank of England holds rates as economy set for record slump

The Bank of England (BoE) left interest rates unchanged at 0.1% as it predicted a record slump for the UK economy due to the coronavirus (COVID-19) pandemic.

The BoE's Monetary Policy Committee (MPC) voted unanimously to hold rates as it said it expected Britain's economy to take longer to get back to its pre-pandemic size.

The BoE expects the economy to shrink by 9.5% in 2020, which would mark the biggest annual decline in 100 years. However, that is better than its initial estimate of a 14% contraction.

However, the BoE warned that the jobs market recovery would take longer.

In its first official forecast since the pandemic hit, the BoE said the recovery had been 'earlier and more rapid' than it had assumed in May, reflecting a faster easing of lockdown restrictions.

It said spending on clothing and household furnishings was now back to pre-COVID levels, while consumers have carried on spending more on food and energy than before the lockdown.

However, it stated that leisure spending and business investment 'remained subdued', which would weigh on the recovery.

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