Bank of England: rapid GDP rebound likely as vaccines take effect

Economists say lenders should still prepare for negative interest rates in case of downturn

• What would a negative interest rate mean for UK consumers?

The Bank of England expects a rapid rebound of the UK economy later this year as the vaccination programme takes effect, but also announced moves to introduce negative interest rates if the recovery falters.

The Bank forecast a 4.2% slump in the first quarter, followed by a resurgence of economic activity as vaccinations allow the economy to return to brisk growth. The Threadneedle Street economists forecast that GDP will return to pre-pandemic levels by March 2022.

Related: Negative interest rates are a possibility in UK, but far from a certainty | Larry Elliott

In February 2021 the Bank of England told high street banks and building societies they have six months to prepare for negative interest rates. BoE policymakers stressed that the request did not mean a cut in borrowing costs below zero was imminent or even likely, but with few tools left to boost the economy in the event of a downturn, the central bank needs negative rates to be available as an option.

Related: The Bank must not fear radical action. Britain needs negative interest rates