Britain’s Silly Flirtation With Negative Interest Rates
Sub-zero rates aren’t the way to get banks to lend more money. They should only be used if nothing else manages to stimulate the economy.
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Photographer: OLI SCARFF/AFPAndrew Bailey, the Bank of England’s new governor, tried out a little bit of “whatever it takes” central banker language last week by opening up the possibility of negative interest rates in the U.K. “I don’t want to say we’re nearer” to that eventuality, he said “but we’re not ruling anything out.”
For now the BOE’s focus is still on buying more bonds through its quantitative easing programs to manage the Covid-19 economic crisis, and rightly so. Negative rates would open up a dangerous pathway for Britain. They should only be used if nothing else manages to stimulate the economy. The official bank rate has been lowered twice this year already to its current 0.1%.