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Why Does the Bank of England Declare Itself Willing for More Stimulus?

Why Does the Bank of England Declare Itself Willing for More Stimulus?

Britain is one of the countries which have severely been affected by the coronavirus outbreak during the current year. British financial sector had been suffering and economic issues raised the necessity for the government to develop new reforms and regulations to stop the virus from spreading and resolve the problems that badly impacted the strength of the British currency, pound sterling, as well as the whole banking system.

Bank of England was the one who took major steps in avoiding the unpleasant situation and supporting the people of the UK to save their physical, as well as the mental health from getting worse. Their response to Covid-19 which served the above-mentioned purpose was to develop a package of measures that would minimize the economical loss and save British businessmen from losing money and becoming broke. As a result, the stimulus package has actually been helping a large number of British people to cope with the Coronavirus pandemic.

On-Going Plan

Since the plan turned out to be a success, the Bank of England decided that carrying on their actions won’t cause any harm to the financial sector which is why they are planning to continue these packages. Despite the tension that accompanies Brexit and high rates of unemployment which bothers the whole population of Britain, BoE is still ready to expand more stimulus and go on doing what they started.

As Reuters reports, the Bank of England already made 745 billion pounds as a result of the package but experts say that their plan has too many downsides. Clearly, BoE is spending too much money to avoid suffering. They may avoid financial troubles for a short time but it will definitely be harmful in the long run. According to a large list of the best forex brokers in the UK, so much spending could add to the inflation of the GBP alongside already existing Brexit issues. The rate of inflation is getting high and high and the UK economy is facing a challenge of entering a huge period of inflation.

Possible Success

On the other hand, some of the experts believe that the UK economy needs even more stimulus. For example, Michael Saunders considers that taking more action would add a bunch of success to a suffering economy but it’s likely that his forecast won’t be accurate enough because there are a bunch of other issues that need to be taken into account including Brexit and political instability in the country. Just like Saunders, the members of the Monetary Policy Committee (MPC) which is a part of the Bank of England and manages to produce the United KIngdom’s monetary policy, deeply doubts about recovering of UK’s economic until the end of 2021. The main reason is Brexit.

After the pandemic, the international relationships between the UK and the EU countries got even worse. It still poses a big threat to immigration, national security, aviation, and trades as well. Therefore, spending so much on economic may add to inflation of the British pound sterling and cause even higher rates. This is why experts are concerned about the issue and doubt its success.

However, some people are optimistic about the new plan. Andy Haldane who is a leading economist of the UK’s central bank looks optimistic about the financial crisis and recovery plan. He is certain that the Central Bank will make a good fortune and the effect of their new package plan will be close to the maximum. This means that there are still some people who believe that new policies will help to cut the interest rates below zero percent maybe for the first time in a while.

Despite Haldane’s assumptions, the UK can’t be sure about the success of the stimulus package politics, and still, adding more stimulus has a lot of disadvantages as well as advantages. Because of these doubts, working out the pros and cons still continues.

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