Economic Review – August 2020

As recent economic statistics confirm the UK officially entered recession, Bank of England (BoE) forecasts suggest the slump will be less severe than previously thought, but the ensuing recovery is likely to take longer.

The BoE left base rates unchanged following the latest meeting of its Monetary Policy Committee (MPC) but stated that it was ‘currently considering’ the case for cutting interest rates below zero.

Major benchmarks ended August in positive territory. US stocks hit record highs at the end of the month after Federal Reserve Chairman Jerome Powell outlined the central bank’s inflation control measures and strategy for avoiding future crises at the virtual Jackson Hole Economic Policy Symposium. Powell said that the central bank would launch a new monetary policy framework that will likely see interest rates in the US remain low for longer. European stocks were mixed as markets continued to try and make sense of the historic shift on inflation announced by the Fed.

Official data shows that retail sales rose above prepandemic levels in July as a strong rebound in consumer demand continued.

The latest public sector finance statistics revealed government debt breached the £2tn mark for the first time amid heavy spending designed to support the economy through the COVID-19 pandemic.