Coronavirus: Bank of England buys £200bn of government debt to avoid austerity

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The Governor of the Bank of England said it is buying £200billion of Government debt in a bid to avoid a return to austerity.

The bank’s chief Andrew Bailey has explained why the nation’s central financial institution is taking on so much of the country’s debt.

In addition to the £200billion the Bank of England has already bought, it is likely to hoover up even more, he told ITV.

Mr Bailey said the purchase had been in an attempt to spread the cost of the coronavirus response across society.

He said: “There are choices, and I hope those choices will be looked at very seriously.

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The banking chief said the aim was to spread the cost of coronavirus across society

“I think, one of the reasons that the Bank of England [which is] obviously acquiring a much larger stock of Government debt than (in) the financial crisis of 10, 12 years ago would have been imagined is what we can do, providing, you know, the overall credibility of the framework remains in place, and the independence of the Bank is very important to that point…

“We can help to spread, over time, the cost of this thing to society, and that to me is important. We have choices there and we need to exercise those choices”.

Earlier in May the Bank of England voted to keep the rate of interest on its loans at 0.1% in a bid to stimulate spending.

“The spread of Covid-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world,” a statement issued by the bank said at the time.

“Activity has fallen sharply since the beginning of the year and unemployment has risen markedly.

The coronavirus has taken a big chunk out of the economy

“Economic data have continued to be consistent with a sudden and very marked drop in global activity.  Oil prices have been volatile.

“There have, however, been tentative signs of recovery in domestic spending in China, and this is likely to be echoed in other countries that have started to relax Covid-related restrictions on economic activity.”

Economic forecasts for the UK have been bleak since the coronavirus pandemic took hold.

Earlier today the NIESR thinktank released a report predicting that the UK economy will shrink by 30% this quarter.

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Coronavirus outbreak

The contraction of the country’s Gross Domestic Product (GDP) would far outstrip anything seen in recent decades.

The first quarter of 1974 was the worst period until this point since records began, with GDP dropping 2.7%.

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