The Bank of England’s chief economist has said the bank is not remotely close to any decision on taking interest rates below zero to cope with the pandemic.
Andy Haldane said the key factors for the BoE to consider were the consequences of negative rates for banks and lenders, which would squeeze margins.
“Those are the aspects that we’ll look at,” Haldane said during an online discussion organised by the Confederation of British Industry on Tuesday.
“To be clear, reviewing and doing are different things and currently we are in the review phase and have not reached a view remotely yet on the doing.”
Since the start of the coronavirus outbreak, the bank has slashed its main rate to a record low of 0.1 per cent, prompting questions about whether it will cut into negative territory to stimulate the economy further.
It would mean banks are charged a small amount for keeping their money with their country’s central bank. The European Central Bank’s (ECB) deposit rate is currently minus 0.5 per cent.
Last week, BoE governor Andrew Bailey said it would be “foolish” to rule out negative interest rates. He has previously argued against them but admitted he had changed his position.
He was keen to highlight that the Bank is not saying it will cut rates further: “We’re not ruling it in but we’re not ruling it out.”
Haldane also said the recent economic data was coming in a “shade better” than a scenario published by the bank earlier this month.
“This is perhaps still a V but perhaps a fairly lop-sided V,” he said, referring to the shape of the economy’s downturn and recovery.
“The risks to that probably…lie to the downside rather than the up and as I say, a rather more protracted recovery even than the one that I have mentioned.”