LONDON (Reuters) – The Bank of England is not remotely close to any decision to take interest rates below zero for the first time as a way to help Britain’s economy cope with the coronavirus crisis, the central bank’s Chief Economist Andy Haldane said.
Haldane said the key factors for the BoE to consider were the consequences of negative rates for Britain’s banks and lenders, which would see a squeeze on margins, and how such a move would affect confidence in the broader economy.
“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.”
Last week, BoE Governor Andrew Bailey said he was less opposed to negative interest rates than before the coronavirus crisis escalated, but that there were “mixed reviews” about how well they had worked for other central banks.
Haldane said on Tuesday some recent data was coming in just “a shade better” than a scenario for the economy published by the BoE earlier this month, but risks remained that the recovery could be slower as companies and consumers remained cautious.
“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.”
(Writing by William Schomberg; editing by Kate Holton)
