U.K. GDP could contract by 14% this year as a result of the economic hit from the coronavirus, warns the Bank of England.
The central bank outlined a "plausible illustrative scenario" in its May monetary policy report, published Thursday.
"While the scenario is highly conditional, it helps to illustrate the potential impact of COVID-19 on the economy and the channels through which the impact is felt," the report said.
Under the scenario, social distancing measures and government support remain in place until early June. They are then gradually unwound by the end of September.
Inflation is expected to fall further below the bank's 2% target in the second half of the year, "largely reflecting the weakness of demand."
U.K. GDP then rebounds, with 15% growth forecast for 2021, and a further 3% in 2022.
"The unprecedented situation means that the outlook for the U.K. and global economies is unusually uncertain. It will depend critically on the evolution of the pandemic, and how governments, households and businesses respond to it," the report said.
The bank's monetary policy committee also voted to keep interest rates at 0.1%.
Separately, the Norwegian central bank cut its policy rate to zero at a monetary policy meeting Wednesday. The bank's Monetary Policy and Financial Stability Committee had reduced interest rates to 0.25% from 1.5% in March.
"The committee does not envisage making further policy rate cuts," the bank said in an update Thursday.
