British central bank chief does not rule out negative key interest rates

Andrew Bailey

According to the head of the British Central Bank, negative key interest rates are in principle not excluded.

(Photo: Bloomberg)

London The British central bank does not take any monetary policy option off the table in the corona crisis. In principle, negative key interest rates are also not excluded, as central bank chief Andrew Bailey said in a hearing in the British parliament on Wednesday.

You don’t rule out certain steps because that would be unwise, Bailey said. On the other hand, that does not mean that certain steps are being considered.

For some weeks now there has been a debate in the financial markets as to whether some large central banks could lower their key interest rate below zero in the corona crisis. In addition to the Bank of England, the discussion also affects the US Federal Reserve. While the Fed has so far clearly ruled out such a move, the British central bank is more flexible.

The instrument of negative key interest rates is controversial among economists. Proponents say the strategy tends to have positive economic effects, especially with regard to bank lending.

On the other hand, more critical voices see negative effects predominate, especially on the part of savers and banks. Negative interest is usually a burden for both.

More: The ECB sees positive effects from negative interest rates.

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