Bank of England warns UK unemployment will hit 2.5m after Covid-19 slump – as it happened | Business


In the past, notably during the financial crisis of 2008-09, Threadneedle Street has publicly rejected the use of negative rates, warning that they would make banks less profitable and potentially drive some of them to the wall.

But as the Bank’s governor, Andrew Bailey, noted on Thursday, life has moved on. Banks are less vulnerable than they were a decade or so ago, other central banks, including the European Central Bank and the Bank of Japan, have used them, and estimates of how low interest rates can go have moved down.

“Ten years is a long time in monetary policy,” Bailey said in a nod to Harold Wilson.

The seriousness with which negative rates are being considered can be judged by the fact that the Bank devoted four pages of its latest monetary policy report (MPR) to weighing up the pros and cons. You don’t do that if you are trying to kick the idea into the long grass.

Bailey’s response to a question about negative rates at his MPR press conference was also revealing. “This is the most extensive assessment we have ever done,” the governor said. “It is sensible to have negative interest rates in the tool box but we are not planning to use them at the moment.”

The key words there are “at the moment”…..

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