The Bank of England will pump an extra £150bn into the economy as it warned the resurgence of Covid-19 will lead to a slower, bumpier recovery.
Tighter lockdown rules, including new restrictions in England, are expected to push the UK into another downturn.
While it is expected to avoid another recession, the Bank believes unemployment will rise sharply as government support schemes wind down.
Policymakers also kept interest rates on hold at a record low of 0.1%.
The Bank expects the economy to shrink 2% in the final three months of 2020, before bouncing back at the start of 2021, assuming current restrictions loosen.
It does not expect the UK economy to get back to its pre-virus size until the following year.
Policymakers expect the economy to shrink 11% in 2020.
Unemployment is expected to peak at 7.75% in the middle of next year, which would be the highest rate since 2013.