The Bank of England has kept the base rate on hold at its record low of 0.1 per cent and increased quantitative easing by £100bn to £745bn.

The central bank cut interest rates from 0.75 per cent to 0.25 per cent on March 11, as the coronavirus crisis began to take hold, and then slashed the official rate to 0.1 per cent on March 19 in a bid to bolster the economy.

At its meeting ending on 17 June, the Monetary Policy Committee voted unanimously to maintain base rate at 0.1 per cent and to continue with the existing programme of £200bn UK government bond and sterling corporate bond purchases

MPC members voted by a majority of 8-1 for the Bank to increase the target for QE asset purchases by an additional £100bn to £745bn.

Killik & Co associate investment director Rachel Winter says: “As interest rates remain at historic lows, the reality is that we may see them stay at this level, or even drop to negative as early as next year. 

“The prospect of negative rates has only recently been floated by the central bank due to the UK-wide lockdown having had a far greater hit on the economy than predicted, with a 20.4 per cent contraction in April – another record. 

“For now, the fresh round of QE will provide another cash injection; perhaps biding time until we can start to see the effect of lockdown restrictions easing.

“As non-essential businesses have now been allowed to re-open, and assuming that social distancing measures will be further relaxed over the coming months, we could see sectors such as retail rebound quicker than others.

“The next few months are crucial, but the Bank may need to take bold action if the economic nosedive does not start to change direction, limiting the longevity of any recession.

“This isn’t only a consideration for the UK: global rates are expected to remain low and the Fed has already confirmed it will not raise rates until 2023.”

Santander UK chief economist Frances Haque says: “Although comments have been made in recent weeks by MPC members on the possible move to negative interest rates, making it clear that this is currently under review, any move will need to be accompanied by additional forward guidance.

“However, given the current state of the UK economy and how it will be able to recover from the restrictions of lockdown, there continues to be a significant possibility of further rate cuts as we move through the rest of 2020, if the economic data remains bleak.”