THE TIMES: If pricing in the money markets is anything to go by, the Bank of England will introduce negative rates in Britain for the first time next year.
It has been no secret in recent months that Threadneedle Street is reviewing how sub-zero rates might be implemented, although Andrew Bailey, the Bank’s governor, has been at pains to emphasise that its work implies nothing about whether policymakers will use the policy tool.
The Bank last week asked commercial lenders for information about whether their systems could cope with negative rates, spurring yet further speculation that it was moving closer to cutting rates below zero.
By charging firms to keep deposits at central banks, the theory behind negative rates is that it encourages commercial banks to lend rather than hoard cash, thereby stimulating the economy.
The Bank will be looking to other countries where negative rates have been deployed to gauge whether they work in practice. » | Gurpreet Narwan, Ben Martin | Monday, October 19, 2020
