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It said new coronavirus vaccines boded well for long-term growth, but that a recent jump in cases would drag on the recovery.

Failure to strike a trade deal with the European Union could also hamper the economy, it added.

The central bank held rates 0.1% and left its stimulus programme unchanged.

“The outlook for the economy remains unusually uncertain,” the Bank said.

“It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom.”

Clothing and food prices fall in November lockdown Hospitality worst-hit as unemployment rises again UK growth slows again in October as rebound stalls

The Office for Budgetary Responsibility, the government’s independent forecaster, predicts the UK economy will shrink by 11.3% this year – the biggest decline in 300 years. It expects unemployment to peak at 9.7%.

The Bank said the successful trialling of some Covid vaccines and plans to roll them out next year were likely to “reduce the downside risks to the economic outlook”.

However, it said recent global activity had been affected by the increase in Covid cases and re-imposition of tougher than expected restrictions.

“The successful rollout of vaccines should support the gradual removal of restrictions and rebound in activity,” it said, “although it is less clear how this prospect will affect the immediate economic behaviour of households and businesses.”

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