Bank of England’s policymaker points out that cutting the interest rate below zero would be ‘good for growth’. The cut in interest rate can be carried out without affecting the commercial banks. It seems that negative rates have worked in various countries and it could assist the UK in its economic recovery.
It is reported that members of the MPC are yet to finalise on whether a fresh stimulus should be introduced by increasing the purchase of assets under the quantitative easing programme. Countries such as Denmark, Sweden and the Eurozone have pushed their interest rates below zero.
Silvana Tenreyro, a member of Threadneedle Street’s monetary policy committee, told the media, “My overall assessment is that, while we can never have complete certainty, negative interest rates should with high likelihood boost UK growth and inflation. Cutting bank rate to its record low of 0.1 percent has helped loosen lending conditions relative to the counterfactual (of no policy change), and I believe further cuts would continue to provide stimulus.”
Bank of England sees the UK economy in a ‘very difficult period’. The recent resurgence of the pandemic with the discovery of a new strain has left the Britain economy vulnerable and it will further push economic recovery. It is reported the recovery shape of the UK is likely to point to the Bank of England’s trajectory forecast in November. That said, the unemployment rate in the country is still higher than the official estimate of 4.9 percent.