The Bank of England's Monetary Policy Committee (MPC) announcement that there would be no change to rates but a quantitative easing (QE) increase of £100bn to a total bond purchase target of £745bn came as "no surprise" to the industry, according to some commentators, although others warn more "unconventional" monetary policy could be round the corner.
Neil Birrell, CIO at Premier Miton, said: "There is nothing in this for the markets to react to, but the increase in the bond purchases shows that central banks will keep going to the well to support the financial system and as the BoE says, it is ready to take further action."
This increase is unlikely to be "the last time that the Bank ramps up QE this year", according to Richard Carter, head of fixed interest research at Quilter Cheviot, who pointed to a "recovery likely to be hampered by the ongoing need for social distancing as well as fears of a disorderly Brexit".
He added: "It proved too early for negative interest rates, but more unconventional measures will probably be necessary unless a vaccine or better treatments become available."
Rupert Thompson, CIO at Kingswood, agreed, suggesting that negative rates would be a "move of last resort" for the central bank, which would "only be implemented if the economic recovery now starting to get underway runs into problems later in the year".
The events of 2020 means the UK economy has a long way to recover, as Charles Hepworth, investment director at GAM Investments, noted: "In what are very difficult times economically for the UK, which has seen the economy shrink 20% in April alone, we now have real GDP stagnating way below the level seen during the Global Financial Crisis to an almost unbelievable level last seen in July 2002, with the coronavirus erasing nearly 18 years of growth in just a few months."
Negative rates are not the only option left to the bank and Sajiv Vaid, fixed income portfolio manager at Fidelity International, said other possibilities may still be on the table: "The BoE has made it very clear that it is ready to take further action as needed to aid the economy and for us this does not rule out the possibility of yield-curve controls, just as we have seen in Japan.
"Longer term, we continue to see rates remaining low and rangebound and it is quite clear that the BoE will stand ready to do all that it takes."
The amount and timing of the QE expansion "should enable the central bank to maintain its current rate of asset purchases through to July, just in time for the August meeting where the Bank will likely need to announce a further extension", said Seema Shah, chief strategist at Principal global Investors.
She added: "Indeed, the government borrowing requirements suggest that the Bank of England will need to up its purchases if it wants to avoid a sharp spike in bond yields."
Shah also commented on the dissenting voice, chief economist Andy Haldane, who voted to keep the QE target unchanged: "It will be interesting to know if this was because he has taken a more positive view of the UK outlook or because he believes negative rates would be a more effective policy route at this stage."
Head of global macro at Fidelity International, Anna Stupnytska, added that "while the minutes acknowledge that the impact of the coronavirus crisis on Q2 growth is likely to be ‘less severe' than previously anticipated", the risks remain "skewed to the downside".
"This assessment is consistent with our outlook for a protracted recovery ahead. In this respect, it is highly likely that that BoE will have to act again to support the economy in the months ahead, with negative rates remaining a possibility."