Bank of England sees worst slump in 300 years as coronavirus bites

Many economists expect the BoE to increase its asset purchase programme in June, before the extra 200 billion pounds it gave itself in March is exhausted by the furious pace at which it is buying British government debt.

Some forecasters doubt Britain will bounce back as quickly as the BoE assumes.

"We see this forecast as credible for 2020, but are less convinced by the 2021 recovery, where we take a more cautious view, implying weaker growth, lower inflation, wider deficits and more MPC action," Morgan Stanley's Jacob Nell said.

The BoE said inflation was likely to fall below 1% in the next few months, half the BoE's target, but that recent figures suggested demand had stabilised, albeit at very low levels.

The BoE also said banks were in a much better position to support households and businesses than during the global financial crisis.

Sterling rose after the central bank's announcement, initially gaining as much as half a cent against the U.S. dollar. British government bonds prices fell slightly.

The BoE acknowledged there were risks that its scenario could prove too optimistic because people might remain cautious about resuming their normal lives after the lockdown.

Workers might be worried about their jobs and companies might also be more risk averse, saving money rather than spending. ($1 = 0.8080 pounds)