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View the article online at http://citywire.co.uk/wealth-manager/article/a661709

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

by Emma Dunkley on Feb 26, 2013 at 15:25

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.


5 comments so far. Why not have your say?

Doug Sammons

Feb 26, 2013 at 16:00

It makes you wonder at the quality of these people!

I think Japan had negative interest rates for years and look what good it did them.

The problem of low growth is almost worldwide and the solution is not in negative interest rate

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Once bitten twice shy

Feb 26, 2013 at 16:46

Cut taxes and red tape for businesses. ie. get government out of the way....completely!

Then we'll recover!!!

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Paul Renken

Feb 26, 2013 at 17:46

No, No, No--Monetary mechanism adjustments (like adopting zero rates) to somehow think the UK would be more successful than Japan is daft thinking. it's also punitive to savings and pensions.

It takes actual political policy change to incentivise reasonable risk taking (to make a loan) via business growth, particularly at the SME level where the vast majority of jobs are created which will make the economy improve. Other mechanisms of worth for consideration--tax breaks for employment head count growth, capital pools for SME's, asset lease or sales of Crown interests and property, higher capital gains relief for long term equity versus derivatives, etc.

Again, incentives, not punishments.

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graham frost

Feb 26, 2013 at 19:52

More misguided thinking, punishing savers and forcing them into riskier assets which will go pop when bond yields back up as QE withdrawn. Besides yields are already negative! And Carney is coming to join the party!

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Keith Cobby

Feb 27, 2013 at 13:41

The fellow who, when asked why he robbed banks, replied because that is where the money is, was on to something. Any money you leave on deposit is being stealthily removed by the Government and BoE. The same applies to Gilts. Avoid at all costs.

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