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BoE’s Tucker moots negative interest rates to kick-start economy

by Emma Dunkley on Feb 26, 2013 at 15:57

BoE’s Tucker moots negative interest rates to kick-start economy

Paul Tucker, the deputy governor at the Bank of England, has suggested negative interest rates should be considered to kick-start bank lending.

Speaking to MPs on the Treasury Committee, Tucker said he raised the idea as one alternative way to help revive the UK economy, the BBC reports.

Negative interest rate would mean the Central Bank charges commercial banks to hold their money, with the aim of spurring the banks to lend more.

‘I hope we will think about whether there are constraints to setting negative interest rates,’ said Tucker.

‘This would be an extraordinary thing to do and it needs to be thought through carefully.’

Interest rates have been stuck at a record low of 0.5% for nearly four years, punishing savers who have seen the income from their savings drop since the crisis.

Other measures undertaken by the Bank to boost the economy have included £375 billion of quantitative easing.

Further possible measures include buying assets other than government bonds and reducing the marginal rate of interest on bank reserves held at the Bank to encourage them to lend more, the BBC reports.

2 comments so far. Why not have your say?

Keith Cobby

Feb 26, 2013 at 17:27

Excellent investment advice from Paul Tucker. Don't leave money on deposit and sell your remaining Gilts now.

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John Borgars

Feb 26, 2013 at 19:52

There are not enough banknotes in circulation to permit all citizens to withdraw their current balances and use them to replace mattresses....

April 1st is still five weeks away.

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