Bank of England boosts QE by £150bn; Federal Reserve leaves rates on hold – as it happened

Graeme Wearden

from on 2020-11-05 20:47 (#59ZJZ)

Rolling coverage of the latest economic and financial news, as BoE predicts the UK economy will shrink again this quarter

8.47pm GMT

Finally, here's Reuters' take on a Fed meeting overshadowed by the US election:

The Federal Reserve kept its loose monetary policy intact on Thursday and pledged again to do whatever it can in coming months to sustain a U.S. economic recovery threatened by a spreading coronavirus pandemic and facing uncertainty over a still-undecided presidential election.

Results from Tuesday's vote were still being tabulated in a few key states, though Democratic presidential nominee Joe Biden was near the minimum 270 votes in the state-by-state Electoral College needed to win the White House.

8.16pm GMT

The key message from Jerome Powell tonight is that fiscal and monetary policy both have an essential role to play in helping the economy.

So with the Covid-10 pandemic continuing, and previous fiscal support running out, It's likely that further support is likely to be needed from monetary policy & fiscal policy", he says.

The current economic downturn is the most severe in our lifetimes," Fed Chair Powell says, and continued support from both monetary and fiscal policy" may be needed. https://t.co/cUfRhAQwyV pic.twitter.com/w8Z2nFuESd

Powell: Fiscal policy can do what we can't, which is replace income for individuals out of work through no fault of their own.

Fed Chair Powell summary:

1) He's begging Congress for more stimulus
2) Fed standing by to do more bond purchases, if needed
3) But...he's sleeping a little better at night.

"Clearly the tail risks have diminished" he says.https://t.co/kTR0Ev050Y via @rachsieg

Powell (again) urges Congress to do more stimulus.

"I do think it's likely that further support is likely to be needed from monetary policy and fiscal policy."

He says 2 big risks right now:
-Rising covid cases
-Dwindling household savings (aka unemployment support down) pic.twitter.com/2nuybqcHRG

Wow. Fed Chair Powell is not mincing words:

"I think we'll have a STRONG recovery if we can just get at least some more fiscal support," Powell says.#economy pic.twitter.com/kNfbxWlpuD

7.44pm GMT

Federal reserve chair Jerome Powell is holding a press conference now to explain why the Fed left policy unchanged.

Powell says the US economy has continued to recover', but in recent months the pace of this recovery has moderated.... as has the pace of job creation.

*POWELL: RISE IN COVID CASES 'CONCERNING;' URGE MASK WEARING

Fed Chair role continues to include personal pandemic precautions

Chair Powell says the recent rise in coronavirus cases "is particularly concerning," adding that mask-wearing and following public health officials' guidance "will help get the economy back to full strength."

Chair Powell says the Fed discussed its current bond-buying program at this month's meeting and will "continue to monitor developments and assess how our ongoing asset purchases can best support" the Fed's dual mandate objectives as well as financial stability.

7.26pm GMT

It's extremely hard to see the Fed making any interesting changes until the US election is resolved.

As Aaron Anderson, SVP of Research at Fisher Investments, puts it:

The Fed has been clear that changes to monetary policy are off the table for the time being, and Powell is standing firm on additional easing. Economic data is improving, which has included a very strong Q3 GDP report.

Markets have been a little rocky with both stocks and bonds pulling back recently, but not dramatically. We expect the Fed to remain comfortable with the status quo for now, at least until the political backdrop becomes more clear."

7.19pm GMT

Richard Flynn, UK managing director at Charles Schwab, explains why the Fed's decision is hardly a surprise:

The decision to hold rates will not shock the market. The Fed has indicated that the federal funds rate is likely to be held near zero for several more years until it sees inflation rise, while expanding its balance sheet and using its special facilities to lend.

However, these tools are stretched already. Many Fed officials have been urging Congress to pass more fiscal relief, as that would likely have a more immediate effect in boosting growth, employment, and inflation.

7.11pm GMT

The Federal Reserve has also warned that America's recovery is significantly" dependant on the course of the Covid-19 pandemic, which has battered the economy this year.

The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term

7.09pm GMT

Just in: America's central bank has left US interest rates at record lows.

That's really not a surprise (even if there wasn't an election count going on...)

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longerrun goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.

The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.

6.38pm GMT

Bentley, the luxury carmaker, will stop making fossil fuel cars by 2030 and aims to be completely carbon neutral at the same time, in one of the most ambitious plans of any UK car manufacturer in the transition towards electric vehicles.

It will stop building cars with traditional internal combustion engines within six years, instead making hybrids and then its first battery electric cars in 2025. By 2030 it will sell only pure battery electric vehicles, with zero-carbon exhaust emissions.

5.52pm GMT

We have some late takeover excitement too.

Insurance group RSA has received a 7bn approach from Canadian insurer Intact Financial and Danish insurer Tryg.

The Board of RSA Insurance Group plc (RSA" or the Company") notes the recent media speculation regarding the possibility of an offer for the entire issued share capital of the Company and confirms that on 2 October 2020 it received a proposal from Intact Financial Corporation and Tryg A/S (together, the Consortium") regarding a possible offer for the Company the Proposal").

This may or may not lead to an offer being made for RSA.

RSA Insurance has just confirmed bumper scoop from @business that it has received a takeover approach from Canada's Intact and Tryg As. Story on terminal/w Jan Henrik, @RuthsDavid @ak_mna

Takeover bid for UK insurance company RSA (formerly Royal Sun Alliance).

Debt is cheap and there are plenty of undervalued UK businesses that could be snapped up by private equity despite the uncertainty".

Interesting. pic.twitter.com/x3Ylpd2aqi

Accordingly, RSA is engaged in discussions with the Consortium in relation to the possible offer.

5.38pm GMT

Today's selloff has pushed the dollar down-- just as Bitcoin hits its highest level since 2018....

The dollar dropped for a third day to its lowest level in more than two years as Joe Biden looked increasingly likely to claim the U.S. presidency and traders geared up for a Federal Reserve policy decision https://t.co/MlrDdJOGqq pic.twitter.com/NrWTRM7DUt

5.26pm GMT

Some late legal news. Dominic Chappell, the businessman who bought the BHS retail chain for 1, has been been jailed for six years for evading 584,000 in taxes.

Chappell, failed to pay the tax on 2.2m in income he received after buying the chain in 2015 from Sir Philip Green - the year before it collapsed.

Dominic Chappell, the former owner of BHS, has been sentenced to 6 years in jail for evading tax on 2.2m income he received in the deal to buy the retailer.
Chappell bought BHS for 1 from Sir Philip Green in 2015, and it collapsed just a year later with the loss of 11,000 jobs.

5.12pm GMT

Europe's stock markets have closed solidly higher, with the Stoxx 600 index gaining 1%.

Every sector rallied, led by consumer cyclicals, technology firms, miners and industrial companies. With volatility ebbing, equities had another decent day, with no sign of election jitteriness.

Investors showed no fear of jinxing the election result on Thursday, continuing to full-force barrel into equities on the assumption that Joe Biden will be POTUS come January.

Little has changed since this morning. Arizona, Georgia, Pennsylvania and Nevada are all still on a knife-edge, with many votes left to count, and hours, days and potentially weeks - dependent on Trump's legal challenges - left in the whole process.

Solid day for European stocks - Stoxx 600 up 1.0%, FTSE 100 up 0.3%, DAX up 1.9%, CAC up 1.2%, IBEX up 2.1%

4.57pm GMT

The US dollar is weakening against other major currencies today.

Sterling has risen almost a cent and a half against the dollar, to $1.312 -- not perhaps the obvious reaction to the Bank of England boosting its money-printing QE programme.

The US dollar is in the red as traders are content to take on more risk and plough their cash into equities and metals - assets that are considered to be riskier.

No change from the Fed is expected this evening and seeing as there is political uncertainty in the US, we won't be getting any fiscal boost from the government anytime soon, and therefore the central bank will probably reiterate its willingness to support the economy.

4.42pm GMT

Bloomberg's Joanna Ossinger has a few theories for bitcoin's strong rally over $15,000 today:

Whether it's uncertainty from the U.S. election, the future of the pandemic or simply more investor interest, the cryptocurrency is at the highest level since January 2018.

The digital currency has been benefiting from high-profile investments from the likes of Square Inc. and Paul Tudor Jones. JPMorgan Chase & Co.'s JPM Coin was reportedly used to make a payment for the first time. Proponents argue bitcoin can be a diversifier in times of uncertainty, so events like lockdowns across Europe or delays of U.S. election results could be fueling its rise.

Bitcoin has made parabolic runs upward before, notably December 2017 and mid-2019, before major tumbles. And many strategists and investors are skeptical. Empire Financial Research's Whitney Tilson said in an email Wednesday that he still regards cryptocurrencies as a techno-libertarian pump-and-dump scheme" and recommends most investors avoid them.

Bitcoin is rallying again, with some pointing to $20,000 as the next target https://t.co/B5duSQrq7n via @markets @crypto

4.39pm GMT

#Bitcoin is another big election winner. Jumps to almost $15k, highest since 2018. Bitcoin has gained >$1,000 since election day. pic.twitter.com/XZIUIdwr2p

4.20pm GMT

Speaking of almost vertical' moves, Bitcoin has surged by over 8% today to its highest level since early 2018.

The cryptocurrency has risen over $15,200 today, up $1,200 since yesterday.

Bitcoin has been on a sustained push through a number of significant price points recently - first $12,000, then $14,000 and now $15,000. Investors place a lot of credence in these so-called resistance levels', as they are points at which buying or selling activity often occurs.

Bitcoin's creation was in part due to fears that increased fiscal stimulus is devaluing currencies globally. As a result, when central banks announce extensive plans to pump money into economies, many investors in the crypto community take this as a major bitcoin buy signal.

3.52pm GMT

Our economics editor Larry Elliott spots a change in Rishi Sunak's furlough scheme announcement today:

There is a limit to what the Bank of England can do to boost activity, and that piles extra pressure on Sunak. Over the past couple of months, the chancellor has dropped talk of saving only viable" jobs and is now in whatever it takes" mode.

It was significant that his latest statement did not include any mention of eventually taking steps to reduce the record peacetime deficit the UK will run in the current financial year. The risk of doing too little is seen as greater than that of doing too much.

3.36pm GMT

The market reaction to the US election is incredible', says Saxo Bank's John Hardy.

Equities and bonds have gone almost vertical since Election Night', he writes, despite president Trump hotly contesting the results and the prospects for two years of ugly political gridlock.

The most likely immediate driver of the action could simply be that the market has put on excessive volatility hedges on the election uncertainty, and that the unwinding of these hedges (despite the outcome) means the need to unwind short equity futures and short U.S. T-bond futures contracts.

Other, less obvious, contributions to the enthusiasm are that the avoidance of the Blue Wave" scenario means we avoid any corporate tax hikes and the possibly of much lower inflation risks on the shortfall of stimulus. Further down the road, one has to wonder if risk sentiment on the outlook could quickly be tempered or worse after this initial relief trade on the risks to growth on lower stimulus prospects and economic scarring from the Covid-19 crisis.

Yes, the Fed will try to do more at the margin, but monetary policy is weak medicine compared to fiscal policy at the zero boun

2.45pm GMT

The New York stock exchange has also opened higher, as yesterday's post-Election Day rally continues.

Markets seem to be banking on Joe Biden becoming the next US President with US indices up yesterday, despite the fact the result is not yet nailed on.

The futures market indicate that US shares will open strongly, indicating that investors are brushing off Donald Trump's threats to contest the result in court.

2.34pm GMT

European stock markets are racking up their fourth day of gains this week, as investors continue to watch the US election drama unfold.

The main indices are all higher, with Germany's DAX leading the way with a 1.4% gain.

Stock markets continue to take the US election in a positive frame of mind, and with the BoE throwing more QE into the fray, the second central bank to do so in a week, the outlook for stocks continues to brighten.

Last week's selloff looks more and more like pre-election jitters, a bout of nervousness that has been reversed even more swiftly than it appears.

2.29pm GMT

On the other hand, the Institute of Fiscal Studies is not impressed by the furlough scheme extension:

Taken aback by ChX statement.

Basically return to March schemes (dreamt up on the hoof in 24 hrs) as if nothing learnt since.

Wasteful & badly targeted for self-employed. No effort at targeting sectors/viable jobs for employees. Big contrast to position just days ago.

Spending money well matters, not just how much gets spent. It's bonkers we're now going to have provided 9 months of hugely expensive self-employment grants via a terrible system. Loads of people getting far too much cash - loads who badly need it getting nothing.

2.19pm GMT

Following Rishi Sunak's latest furlough scheme extension, there are also calls for more help to prevent unemployment spiralling even higher next year.

Nigel Morris, employment tax director at MHA MacIntyre Hudson, says:

A UK wide furlough scheme with a fixed end-date and the flexibility to manage local and regional restrictions will be a real help for business drawing up their budgets. Companies now know what they need to pay out in NIC and pension costs over the coming months.

The fact the Job Retention Bonus (JRB) and Job Support Scheme (JSS) have been deferred also provides additional clarity; businesses no longer face the prospect of grappling with a whole new set of rules, or the admin juggling act of using multiple support schemes.

Extending the furlough scheme is a big boost and will help secure hospitality jobs in the medium term across the whole of the UK. Keeping jobs alive during this lockdown and throughout a bleak-looking winter period, which is likely to see businesses trading under severe restrictions, is key to the future survival of the sector.

Hospitality is facing a tough winter ahead, though, and businesses will need additional support if they are to survive. We will need enhanced grant support to keep venues alive and a solution to the ongoing rent debt problem that continues to linger over the sector. These must come alongside a clear roadmap for a return to business. Without these, the extended furlough scheme alone is not enough to keep hospitality alive and will have been a wasted investment of public funds.

Even under a new lockdown, many sectors - retail and hospitality - will be preparing for Christmas trading and managing staffing levels could prove to be tricky. A careful juggling act will be needed to strike a balance between taking advantage of the furlough scheme and ensuring adequate staff numbers are in place to meet heightened demand.

Whilst millions of jobs will be protected over the winter months, a question mark does still hover over whether the Government is still simply delaying the inevitable cliff edge of job cuts, which was expected in October. Businesses should use this time wisely to seize every opportunity to make the most of the support available, whilst taking every measure to ensure that as many furloughed employees as possible can come back into work full time once the scheme ends.

1.39pm GMT

You'd be forgiven for losing track of the government's various job protection schemes...

What can you never have enough of? Different furlough schemes - here's the EIGHT versions we've had during this pandemic (although three of them never happened) pic.twitter.com/Y76vUtKfjO

1.37pm GMT

The Bank of England and the Treasury have delivered a double-whammy of fiscal and monetary help today -- 150bn of fresh stimulus, swiftly followed by the furlough extension.

The Bank of England's new quantitative easing move will help keep government borrowing costs very low, and mop up more of the huge deficit incurred under the pandemic [the government sells the debt to investors, who sell it onto the BoE].

Announcements today by the Bank of England and the Chancellor will save some jobs in the most affected sectors although may come too late for some businesses that have already made plans to downsize.

The Government will now need to focus on providing additional support to those who will lose their income despite the extra measures - and many workers will require help in retraining so they can move to other parts of the economy where growth is likely to be.

1.07pm GMT

The latest healthcheck on UK construction shows that housebuilding is pretty strong, but civil engineering is much weaker.

IHS Markit's monthly PMI survey shows that home construction was by far the best-performing area of construction activity in October", with builders reporting pent-up demand and improving housing market conditions in recent months.

Efforts to reduce overheads and ongoing economic uncertainty contributed to a further decline in staffing numbers across the construction sector.

The rate of job shedding was nonetheless much slower than seen in the second quarter of 2020.

12.35pm GMT

Just in: The job protection furlough scheme will be extended until the end of March.

Chancellor Rishi Sunak has just announced the plan in the House of Commons. It means that the government will pay 80% of the wages of workers who are temporarily laid off during the pandemic (up to 2,500 per month).

Rishi Sunak has announced the government will extend furlough until the end of March next year as the second coronavirus wave and renewed lockdown measures threaten to drive up unemployment.

In a major climbdown for the government after multiple changes to its economic support packages in recent weeks, the chancellor said the Treasury would continue to pay 80% of workers' wages. Employers will only need to pay the cost of pension and national insurance contributions.

12.25pm GMT

Treasury Committee chair and Conservative MP Mel Stride is renewing calls for the Treasury to release forecasts about the economic impacts and the associated harms" of all the Covid interventions considered by the government, including new lockdown measures in England.

He told the Guardian on Thursday:

It would be almost inconceivable for government to be taking decisions without even thinking about these issues and I'm 99.9% certain that the Treasury will have done this work, and therefore I believe it should be made public."

I see no reason why we shouldn't get it well before that. And really... the sooner the better."

We will continue to push and will continue to press, and I'll publicly continue to make the argument [for the forecasts to be released]."

12.17pm GMT

Peter Dixon, senior economist at Commerzbank, reckons the Bank of England may need to consider cutting interest rates below zero next year, if the situation doesn't improve.

He points out that the power of QE diminishes, the more of it you do (government bond yields are already near record lows):

The BoE did not give any further insight into its thinking on negative interest rates, having set out its views in the August monetary policy report.

Futures markets continue to edge closer to pricing in negative rates although they are not expected to come into effect before next summer. As it current stands, the markets are pricing an overnight rate of minus 8.2 bps by September 2021 versus plus 5 bps today which implies a probability in excess of 50% of a 25 bps cut. Our forecast remains predicated on the assumption that interest rates will not fall below zero but there are mounting risks to this view.

11.56am GMT

The Bank of England's projection that unemployment will hit 7.75% next summer is a another blow to companies reliant on consumer spending.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says:

As the unemployment rate is forecast to increase to around 6.3% by the end of the year and to almost 8% early in 2021, consumer demand is likely to take another hit as incomes are squeezed. That will make it even harder for businesses relying on discretionary spending to bounce back.

There is going to be a painful period ahead, as companies are forced to adapt to the change in consumer demand and the shift to online and there could be supply shortages if companies don't get the investment they need to transform.

11.46am GMT

Today's 150bn flurry of QE won't be the last from the Bank of England, predicts Ruth Gregory of Capital Economics.

She writes:

We were virtually the only forecaster to predict back in June that the Bank would loosen monetary policy further at its November meeting. By announcing an extra 150bn today, the MPC didn't disappoint as that was slightly greater than our forecast of 100bn. And this extra QE is unlikely to be the last expansion. We think the MPC will announce at least 100bn more QE in 2021, more than the consensus currently expects.

The MPC kept its dovish language in the minutes, reiterating the downside risks to its GDP forecasts noting that the recovery would take time, and the risks around the GDP projection were judged to be skewed to the downside". And it also said the risk of more persistent period of elevated unemployment remained material" and that if the outlook for inflation weakens, the Committee stood ready to take whatever additional action was necessary to achieve its remit".

What's more, the Bank's GDP and inflation forecasts still look a bit too optimistic to us. Our view is that inflation will be closer to 1.5% by the end of 2022. That's why we believe the Bank will still have to increase its policy support.

The Bank of England has made good on our long-standing forecast for aggressive QE expansion. Markets are still underestimating what the Bank is prepared to do. Learn more in this week's edition of Capital Notes. Free sign up here: https://t.co/gXOF4NNY7y pic.twitter.com/d0ETynym1L

11.36am GMT

Supermarket chain Sainsbury has highlighted the impact of Covid-19 on the economy, by outlining plans to cut up to 3,500 jobs.

The group is closing most of its standalone Argos outlets (in favour of collection points and sites within its supermarkets), and also shuttering its meat, fish and deli counters,

Up to 3,500 jobs are at risk at Sainsbury's as the supermarket closes more than 400 standalone Argos stores and cuts all meat, fish and deli counters.

The supermarket said about 150 Argos stores would be moved into its supermarkets to crack down on costs.

We closed our meat, fish and delicatessen counters in March as we focused all our efforts on feeding the nation. Customers have told us they are happy buying these products in the aisle. We have therefore decided to close permanently our meat, fish and delicatessen counters.

Our pizza and patisserie counters remain open and we continue to freshly bake bread in 1,348 stores

11.19am GMT

Reuters is reporting that the Bank of England will look into' how its 150bn QE expansion - larger than the City expected - was reported in today's Sun newspaper, and online last night.

Here's their story:

Bank of England Governor Andrew Bailey said he would look into how The Sun newspaper was able to report that the central bank would expand its asset purchase programme by 150 billion pounds ($196 billion), hours before it was officially announced.

Leaks of BoE policy decisions are almost unheard of, but a series of government decisions on COVID measures, including economic support, have been reported in British newspapers ahead of their official announcement.

The Bank of England has just announced an extra 150 billion quantitative easing programme - as reported in @TheSun today: https://t.co/aRfF4ALKJR pic.twitter.com/vxV8H1Kt7N

Rishi to extend furlough scheme beyond December as BoE pumps 150bn into economy https://t.co/mxTAaHbRv7

https://t.co/k0a5GXnr2G - @matt_dathan on the case

11.00am GMT

The BoE's latest Monetary Policy report, which outline its latest growth and inflation forecasts, is online here.

The minutes of the Bank's monetary policy committee meeting, where it voted to increase QE by 150bn, are here.

10.44am GMT

Today's QE expansion shows that the Bank - and the Treasury - are firmly in damage limitation mode, writes our Larry Elliott:

Back in August the Bank of England was relatively chipper about the economy. It was the month of Eat out to help out", sectors that had been locked down as a result of the pandemic were opening up and growth was exceeding expectations.

Three months on, the outlook - courtesy of a second wave of Covid-19 - has become much darker. Instead of the 5.5% economic expansion it had been pencilling in for the final three months of 2020 Threadneedle Street is assuming a 2% decline.

10.40am GMT

Today's decision to expand its stimulus by 150bn means the Bank of England has roughly doubled its QE programme this year.

Back in March, the BoE boosted the package by 200bn to 645bn after global stock markets crashed as the Covid-19 pandemic began to sweep the globe.

This is all terrible news for cash savers, who have endured more than ten years of ultra low interest rates. 210 billion now sits in cash accounts that don't pay any interest, up from 26 billion in 2008. A further 837 billion is held in accounts paying on average 0.13%.

This money is slowly but surely losing its buying power, even though inflation is currently so low. That won't be the case for too long, as inflation is expected to move back towards 2% in the first half of next year as lower energy prices fall out of the equation.

10.00am GMT

The Bank of England is predicting that the UK will suffer a much deeper Covid-19 recession than the US or the eurozone.

While UK GDP is now forecast to shrink by 11% this year, US GDP is only expected to fall by 3.75% while the eurozone faces a 6.75% contraction.

Another striking characteristic of today's @bankofengland projections is that UK GDP, or national income, is set to shrink by 11% for the whole of 2020, a record. We are losing more than one in every ten pounds of our income, one of the worst performances in the world: the...

fall in US GDP is forecast at just" 3.75%, the euro-area shrinkage is 6.75% and the global decline is projected at 5.25%. Given that the virus is the same virus everywhere, it is difficult to argue that the UK's policy response to it has been...

economically optimal, even adjusting for the UK's disproportionate reliance on services that thrive on the kind of human contact that the virus has made dangerous. It is not over till it is over, but the combination of excess deaths and excessive economic loss in...

the UK raises big questions for the government

PS typo correction: the excessive" before economic loss" in third thread Tweet should read excess"

9.22am GMT

Here's ITV's Joel Hills on the Bank's new forecasts:

Bank of England's latest forecasts show that economy is set to contract again as England locks down. Activity is still massively depressed and unemployment set to continue rising. Bank expects that 5.5 million people will be furloughed in November. pic.twitter.com/YR98GKHbFB

9.20am GMT

Today's Bank of England forecasts show that hopes of a V-shaped recovery have fizzled out.

Back in June, chief economist Andy Haldane said the recovery looked to be so far, so V', with economic growth rebounding faster than expected.

Material near-term markdown to the forecast reflecting the imposition of new social distancing restrictions.

Now much more of 'W' shape to the recovery. New forecast doesn't return to August and is roughly around 3% below a continuation of the January forecast by the end. pic.twitter.com/VlmQM4gCQP

Bank of England forecast for 2020 now looks pretty gloomy (although still stronger than the OBR's Fiscal Sustainability Report Central Scenario), reflecting the impact of new social distancing measures including lockdown II announced on Saturday. pic.twitter.com/spixw2LmLu

9.06am GMT

On Brexit, this chart from the BoE shows that a third of UK firms say they're only partly prepared for new trading arrangements.

For example, over 40% of businesses in the wholesale and retail, manufacturing, and transport and storage sectors report that they are partially prepared for the end of the transition period, or not at all.

Fewer businesses report that they are partially prepared in the accommodation and food services and construction sectors, where a higher share of firms do not trade with the EU.

8.58am GMT

The Bank has also warned that disruption caused by a significant minority of firms not being ready for Brexit will shave 1% off growth in the first quarter next year.

The problem is that exports will be turned away at the border because of a lack of correct documentation, my colleague Larry Elliott reports.

Recent evidence from the Bank's Agents and a range of business surveys and intelligence suggests that while some businesses feel prepared for the change in trading arrangements, others - particularly smaller firms - reported that they were not fully prepared, with Covid having hampered some preparations.

In particular, while the UK will phase in checks at the border, the EU has stated it will apply full border controls from 1 January 2021, which some businesses are initially unlikely to be fully prepared for.

8.46am GMT

The BoE is now predicting that the UK economy will shrink by 11% this year -- including a 2% contraction in October-December.

That's based on the assumption that the various lockdowns imposed this autumn end as planned, and that previous restrictions remain in place until the end of the first quarter of 2021.

Those restrictions include heightened England-wide measures for the period 5 November to 2 December, following an intensification of regional and subregional tiered restrictions; the five-level system of restrictions announced by the Scottish Government that came in on 2 November; the firebreak lockdown in Wales scheduled to end on 9 November, after just over two weeks; and a four-week period of additional restrictions in Northern Ireland ending on 13 November.

Subsequently, restrictions are assumed to loosen somewhat. For the UK as a whole, the average level of restrictions that was prevailing in mid-October is assumed to take effect, and remain in place until the end of 2021 Q1.

8.43am GMT

And here's economist Julian Jessop on the Bank's new unemployment forecasts:

Bank of England #MPC has revised up its forecast for the peak in UK #unemployment to 'around 73/4%' in 2021 Q2, but actually *lowered* it for 2020 Q4, from 7.5% to 6.3%. (This seems more realistic to me, given recent labour market data and the extension of the #furlough scheme.)

8.36am GMT

Actually... on unemployment the Bank seems to have pushed back its forecast for the peak, due to the recent job retention measures taken by the government.

Today's forecasts now show unemployment at around 6.25% at the end of this year, down from 7.5% expected three months ago.

With the furlough scheme having been reinstated, the MPC expected unemployment to remain significantly lower than its forecast from September, but still rise from the current 4.5 per cent rate to 7.75 per cent by next summer.

7.55am GMT

The Bank has also changed its UK unemployment forecast.

With the economy expected to shrink again in Q4, it now predicts the jobless rate will peak at 7.75% in the second quarter of 2021, up from 4.5% today (that would be the highest since 2013, according to ONS data).

In the MPC's central projection, GDP does not exceed its level in 2019 Q4 until 2022 Q1. As a result, unemployment is elevated.

The unemployment rate is projected to peak at around 73/4% in 2021 Q2, before declining gradually over the forecast period as GDP picks up.

7.38am GMT

The BoE now expects that the UK economy won't return to its pre-pandemic size until the first quarter of 2022.

That's a downgrade - previously, the BoE had expected the recovery be complete by the end of next year.

7.32am GMT

This chart, from the BoE, shows how it expects the economy to contract in the current quarter.

Informed by recent movements in high-frequency indicators of activity and announcements about Covid-related restrictions, UK GDP is projected to fall in Q4.

That largely reflects lower consumer spending on social activities, which is assumed to be partially offset by higher spending on other goods and services.

7.17am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

We start with some breaking news: The Bank of England has boosted its quantitative easing stimulus package by 150bn, as policymakers try to protect the economy from the coronavirus pandemic.

There are signs that consumer spending has softened across a range of high-frequency indicators, while investment intentions have remained weak...

Developments related to Covid will weigh on near-term spending to a greater extent than projected in the August Report, leading to a decline in GDP in 2020 Q4.

Over the remainder of the forecast period, GDP is projected to recover further as the direct impact of Covid on the economy is assumed to wane. Activity is also supported by the substantial fiscal policies already announced and accommodative monetary policy.

The recovery takes time, however, and the risks around the GDP projection are judged to be skewed to the downside.

Rishi Sunak is expected to announce an extension of furlough beyond December amid growing pressure from business leaders to safeguard jobs and the economy during the coronavirus second wave.

The chancellor is preparing to announce that the flagship wage subsidy scheme - which pays 80% of workers' wages - will continue to be made available for parts of the country under the highest levels of Covid restrictions, sources said, in a major climbdown for the government.

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