Bank Of England Governor Says Negative Rates Are ‘In The Toolbox,’ But There Are No Plans To Cut Below Zero

Andrew Bailey, governor of the Bank of England, poses for a photograph on his first day in the post at the central bank in the City of London, U.K., on Monday, March 16, 2020. Jason Alden | Bloomberg via Getty Images

Bank of England Governor Andrew Bailey told CNBC Thursday that there are no plans to deploy negative interest rates in the coming months, despite the U.K. central bank’s “constrained position.”

His comments came shortly after the BOE’s Monetary Policy Committee voted unanimously to keep benchmark interest rates at an all-time low of 0.1%.

Policymakers also decided to leave the size of the central bank’s bond-buying program unchanged at £745 billion ($981 billion).
Sterling climbed 0.4% to notch a fresh five-month high of $1.3184 shortly after the announcement. The U.K. currency has since pared gains.

When asked during an interview with CNBC’s Geoff Cutmore whether the bank would consider negative interest rates next year, Bailey replied: “No, I can’t give you that because I would never give you a judgement on what monetary policy is going to be a year ahead before we get there.”

“What I can tell you is that other analysts are essentially right, in the sense of saying it is in the toolbox. But, there is no plan at the moment to bring it out of the toolbox and put it to work,” Bailey said.

“We’ve looked at the experience of other central banks,” he added, highlighting that many central banks across continental Europe are either currently using negative interest rates or have done so previously.

“I think there is a close relationship between the effectiveness of negative interest rates and the structure of the banking system, particularly the amount of retail funding. And also, the point in the economic cycle at which they have been used in different countries,” Bailey continued.

“Looking at that and looking at our situation, it makes sense to say: Look, we need as many tools in the box as we can get at the moment because obviously, we are in a constrained position with interest rates as low as they are,” Bailey said.

“I would also caution anybody who thinks that that means we are about to pull them out of the box and put them to work. That is not what we are discussing at the moment.”
– CNBC.