Saudi Press

Saudi Arabia and the world
Monday, Jun 02, 2025

Bank of England policymaker defends negative rates

Bank of England policymaker defends negative rates

A Bank of England (BoE) policymaker has defended the potential use of negative interest rates, which could take the cost of borrowing below zero.

Silvana Tenreyro told the Sunday Telegraph that evidence from other countries was "encouraging".

On Tuesday, the BoE governor played down the prospect of taking rates below zero, insisting it just needed to make sure it could do so if needed.

The Bank has so far responded to the pandemic by cutting rates to just 0.1%.

If interest rates are negative, the BoE charges for any deposits it holds on behalf of the banks. That encourages banks to lend the money to business rather than deposit it.

In an interview with the newspaper, Ms Tenreyro - an external member of the Bank's Monetary Policy Committee - said that evidence from other European countries and Japan suggested that negative interest rates had succeeded in cutting firms' borrowing costs and that banks would cope with the extra pressure on their finances, despite coronavirus.

What are negative interest rates?


The term "interest rates" is often used interchangeably with the Bank of England base rate.

Described as the "single most important interest rate in the UK", the base rate determines how much interest the Bank of England pays to financial institutions that hold money with it, and what it charges them to borrow.

High Street banks also use it to determine how much interest they pay to savers, as well as what they charge people who take out a loan or mortgage.

The Bank of England usually lowers interest rates when it wants people to spend more and save less.

In theory, taking interest rates below zero should have the same effect. But in practice, it's a bit more complicated.

"There has been almost full pass-through of negative rates into lending rates in most countries," Ms Tenreyro said.

She added that "banks adapted well" and that their profitability had increased where the policy had been introduced.

But earlier this week, BoE Governor Andrew Bailey played down the idea of taking rates below zero in the near future, and described the experience of other countries as a "mixed bag".

Mr Bailey said on Tuesday: "It would be a cardinal sin in my view if we said we had a tool in the box which we didn't think could be operationally used.

"Yes it's in the tool bag, but that doesn't mean we're going to use negative rates," he added.

The Bank said in August that it was taking a closer look at the case for cutting interest rates even further. In September it also said that it would take a detailed look at how negatives interest rates might work in practice during the last three months of the year.

It has already cut interest rates to 0.1%, a record low, and pumped billions of pounds into the UK economy in a bid to fight the coronavirus-induced downturn.

'Interrupted' recovery


Ms Tenreyro also said that the potential for more local lockdowns could, however, slow down or "interrupt" the UK's economic recovery.

She suggested it will be shaped like an "interrupted, incomplete V", at odds with other more upbeat forecasts.

Speaking on a British Chambers of Commerce web conference on Tuesday, Mr Bailey also urged caution over the "hard yards ahead" as the UK faces a rising number of Covid-19 infections.

He said: "The latest news, that we are seeing a very unfortunate, faster return of Covid-19, is extremely difficult news for all of us and the whole country.

"That does reinforce the downside risks we have in our forecasts.

"The Bank of England will do everything we can within our remit and powers to support the businesses and people of this country."

Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
Paris Saint-Germain's Greatest Triumph Is Football’s Lowest Point
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
European and Arab Ministers Convene in Madrid to Address Gaza Conflict
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
UAE Offers Free ChatGPT Plus Subscriptions to Citizens
Lebanon Initiates Plan to Disarm Palestinian Factions
Iran and U.S. Make Limited Progress in Nuclear Talks
The Daily Debate: The Fall of the Dollar — Strategic Reset or Economic Self-Destruction?
Trump Administration's Tariff Policies and Dollar Strategy Spark Global Economic Debate
OpenAI Acquires Jony Ive’s Startup for $6.5 Billion to Build a Revolutionary “Third Core Device”
Turkey Weighs Citizens in Public as Erdoğan Launches National Slimming Campaign
Saudi-Spanish Business Forum Commences in Riyadh
Saudi Arabia and Spain Sign MoU to Boost SME Sectors
UK Suspends Trade Talks with Israel Amid Gaza Offensive
Iran and U.S. Set for Fifth Round of Nuclear Talks Amid Rising Tensions
Russia Expands Military Presence Near Finland Amid Rising Tensions
Indian Scholar Arrested in Crackdown Over Pakistan Conflict Commentary
Israel Eases Gaza Blockade Amid Internal Dispute Over Military Strategy
President Biden’s announcement of advanced prostate cancer sparked public sympathy—but behind closed doors, Democrats are in panic
A Chinese company made solar tiles that look way nicer than regular panels!
Indian jet shootdown: the all-robot legion behind China’s PL-15E missiles
The Chinese Dragon: The True Winner in the India-Pakistan Clash
Australia's Venomous Creatures Contribute to Life-Saving Antivenom Programme
The Spanish Were Right: Long Working Hours Harm Brain Function
Did Former FBI Director Call for Violence Against Trump? Instagram Post Sparks Uproar
US and UAE Partner to Develop Massive AI Data Center Complex
Apple's $95 Million Siri Settlement: Eligible Users Have Until July 2 to File Claims
US and UAE Reach Preliminary Agreement on Nvidia AI Chip Imports
President Trump and Elon Musk Welcomed by Emir of Qatar Sheikh Tamim with Cybertruck Convoy
Strong Warning Issued: Do Not Use General Chatbots for Medical, Legal, or Educational Guidance
Saudi Arabia Emerges as Global Tech Magnet with U.S. Backing and Trump’s Visit
This was President's departure from Saudi Arabia. The Crown Prince personally escorted him back to the airport.
NVIDIA and Saudi Arabia Launch Strategic Partnership to Establish AI Centers
Trump Meets Syrian President Ahmad al-Shara in Historic Encounter
Trump takes a blow torch to the neocons and interventionists while speaking to the Saudis
US and Saudi Arabia Sign Landmark Agreements Across Multiple Sectors
Why Saudi Arabia Rolled Out a Purple Carpet for Donald Trump Instead of Red
Elon Musk Joins Trump Meeting in Saudi Arabia
Trump says it would be 'stupid' not to accept gift of Qatari plane
Quantum Computing Threatens Bitcoin Security
×