The Bank of England’s Monetary Policy Committee have voted to keep the bank rate at 0.1 per cent while serving dire warnings over the UK economy in the short term.

The BoE predicts that UK GDP will fall by “around” 25 per cent in the second quarter of 2020, while the unemployed rate will rise to 9 per cent.

This follows an estimate of a 3 per cent fall in UK GDP in the first quarter of this year. Two quarters of decline in a row signifies a recession.

However, this outlook is based on current strict social distancing measures, the BoE says, adding that once these are relaxed, activity should recover “relatively rapidly.”

The bank dampens talk of a V-shaped recovery though, saying that precautionary behaviour from households and businesses will probably persist for some time.

It expects growth of 14 per cent in 2021, followed by 4 per cent in 2022.

Inflation dropped to 1.5 per cent in March and will likely fall below 1 per cent “in the next few months,” the bank adds.

The MPC also voted 7-2 to continue with the bank’s quantitative easing program, where it is due to purchase assets worth £645bn by the start of July. The two members who voted against wanted to increase this total by £100bn.

CBI chief economist Rain Newton Smith says: “As thoughts move to restarting the economy safely and effectively, the focus must remain on quickly getting cash to those that need it most and ensuring we rebuild an innovative, sustainable economy. The bounce back loans, the CBILs and the Bank of England’s CCFF scheme are all important building blocks.

“With the aim of building back better, we need to consider how our vibrant Fintech sector can also play a role in providing finance in future.

“Throughout the crisis, the BoE has acted impressively to support jobs and the economy. And it’s coordination with HM Treasury has set a high bar for international policymaking and crisis response.”

Others have a less upbeat outlook, however. Crimson Block Capital chief investment officer Ayush Ansal comments: “Markets have become numb to bleak predictions but this is a particularly grim prognosis.

“Following on from the Office for Budget Responsibility’s prediction of a 35 per cent contraction in GDP during the second quarter, Threadneedle Street’s scenario once again drives home the breathtaking extent of the economic damage we are facing from lockdown.

“Many will see the Bank’s prediction of a return to growth of 3 per cent in 2022 as far too upbeat.

“The sheer magnitude of the economic displacement caused by the lockdown could paralyse the UK economy for years.”