The Bank of England’s role is to maintain UK monetary and financial stability by keeping inflation sustainably low and ensuring that the financial system can serve the people of the UK in bad times as well as good.
To achieve these aims through the Covid-19 crisis we have put in place a package of measures to support jobs and growth, help the economy recover and keep the financial system safe. 
We have cut the bank rate from 0.75% to 0.10% so that businesses and households can borrow more cheaply.
We have introduced a new bank funding scheme (the TFSME), giving banks incentives to pass the cut on to their customers and keep on lending to small and medium-sized businesses.
We have also reduced the amount of their own financial resources, or capital, that banks need to hold when they make loans.
And we are injecting £200bn of new money into the economy via quantitative easing, or QE, which should help boost spending by households and investment by businesses.
But despite the support provided by the Bank and the government, the impact of Covid-19 is likely to be a reduction in jobs and growth in the UK.
In the latest Monetary Policy Report, the Bank’s Monetary Policy Committee (MPC) set out one plausible scenario to illustrate how the UK economy could evolve from here.
It is likely that UK economic activity will fall dramatically in the current quarter of the year and unemployment is likely to rise rapidly.
How the economy recovers from that point will depend on how the pandemic develops and how governments, central banks, businesses, and households respond.
In the MPC’s illustrative scenario, which is based on a number of crucial assumptions, economic activity picks up as social distancing measures are lifted gradually in the UK and the rest of the world through the summer and autumn.
Because the MPC assumes that households and businesses remain cautious about their spending, even after the social distancing measures are fully lifted, the economy does not get back to where it was until around the second half of 2021.
That recovery is supported by measures taken by the Bank and the government.
And it is supported by the UK banking system, which is in a very strong position, unlike at the time of the global financial crisis.
In the interim Financial Stability Report, which was published alongside the Monetary Policy Report, the Bank’s Financial Policy Committee gave the results of a stress test based on the MPC’s scenario.
The test showed that major UK banks and building societies have, as a result of the reforms brought in following the global financial crisis, plenty of capacity to absorb the losses it’s estimated they would make.
It is important that banks use this strength to support the economy by expanding lending to businesses to avoid long-term economic damage. The TFSME and the government’s loan-guarantee schemes will help them do so.
There are many possible scenarios for how the economy evolves.
Depending on the development of the pandemic, the government may lift social-distancing measures more quickly or more slowly than the MPC’s scenario assumes.
It may take longer than assumed for UK households’ and businesses’ caution to lessen.
Distancing measures may be lifted at a different pace in the rest of the world, affecting the demand for UK businesses’ exports of goods and services.
‘Scarring effects’ from the pandemic may affect the capacity of the economy to recover lost ground. For example, some businesses may no longer be viable if spending patterns change permanently as a result of the virus.
We will continue to monitor the economic and financial situation closely.
The intelligence I and my fellow agents gather from businesses in the South West and across the UK will help the Bank to understand how the economy is evolving.
Whatever happens, the Bank will take the actions necessary to support the recovery, ensure inflation returns to target, and maintain the stability of the financial system.
