London —The Bank of England left record-low interest rates unchanged Thursday as it weighed Britain’s vaccine-driven pandemic recovery alongside stubborn fears of rising inflation.
The British central bank said economic growth was “projected to recover strongly over 2021 towards pre-COVID levels,” with the outlook improving as a result of the nation’s rapid vaccination drive.
The bank’s Monetary Policy Committee (MPC) voted unanimously to keep its key rate at 0.1 percent, where it was slashed to one year ago when the coronavirus crisis first erupted.
Policymakers also left their vast quantitative easing stimulus at £895 billion ($1.2 trillion, 1.0 trillion euros), as they mulled the UK government’s lockdown-easing plans but kept a wary eye on inflation worries.
Prime Minister Boris Johnson’s latest phased plan to end England’s current COVID-19 lockdown would deliver a “slightly stronger” rise in consumer spending than previously anticipated, the BoE said in a statement.
The BoE cautioned however that Britain’s 12-month inflation rate, which stood at 0.7 percent in January, would approach the bank’s 2.0-percent target level in the coming months due to energy price hikes.
BoE policymakers “will continue to monitor the (inflation) situation closely”, the bank said in minutes from its meeting.
The near-term economic outlook was brighter due to the successful UK vaccination program, and the impact of the US government’s huge $1.9-trillion stimulus.
Britain has now given more than 25 million people a first dose of a COVID-19 vaccine as it targets a phased exit from current lockdown curbs.
Yet the BoE also cautioned over the “unusually uncertain” longer-term outlook as a result of the pandemic, which has so far killed more than 125,000 people in Britain in one of the world’s worst outbreaks.
The coronavirus crisis sparked a 10-percent collapse in the UK economy last year—the biggest slump in more than three centuries—as Brexit also weighed.
The bank noted that recent UK budget measures, including a hike in taxation on business profits, could slow recovery.