Whilst the Bank of England base rate is currently a paltry 0.1%, at least it’s a positive number.
Today for the first time the Bank of England Governor Andrew Bailey, admitted that they have put “negative interest rates in its toolbox”, where they are under “active review”. He quickly followed that up with, however the Bank does not currently “have a plan to use them”.
This came as the Bank, by a unanimous decision, left rates on hold following their meeting on the 6th August 2020.
Negative Interest rates are common across Europe, the ECB currently use them in an effort to get banks to lend out spare cash in order to give the economy a much needed boost.
The Banks focus, for the time being, remains on continued quantitative easing and reassuring markets that that rates would remain lower for longer.
But continued material deterioration in the economic backdrop increases the risk that the Bank may sooner rather than later be forced to reach in to their toolbox and pull out the negative rate tool.
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