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Deputy Bank of England Governor Mentions the Idea of Negative Interest Rates

Deputy Governor of the Bank of England Paul Tucker, appearing before the Treasury select committee yesterday mentioned the radical idea of negative interest rates. It seemed more of an idea, rather than the groundwork for future policy, but it highlighted the bank does have other options left to help the economy. The idea is based upon the notion, that banks are currently parking considerable sums on deposit with the central bank for safety, rather than lending to individuals and businesses. By charging banks to hold funds with the Bank of England, the banks would be “forced” to lend more.

The idea has been discounted by most analysts as it would also have a negative impact on savers, primarily the elderly, who borrow less and rely on savings for an income stream. The policy would also push some of the smaller building societies to the brink, who rely on deposits to fund their lending.

Headlines:

RBA's Corbett rejects rate cut pressure - The Australian

BOEs Fisher expects “relatively modest” growth in 2013 and sees the need of a more prolonged run of QE at a slower pace with £25bn as a first instalment

Barratts Homes (UK House builder) have said that their order book for new homes is over £1bn

Dovish commentary from Fed Chairman Ben Bernanke, pushed Gold higher

Australia's triple-A credit rating is safe, despite the risk posed by the nation's high household debt levels and a reliance by its banks on foreign funding - Standard & Poor’s Rating Agency

Hong Kong’s economic growth accelerated last quarter to the fastest pace in a year, mirroring gains in China and Taiwan as Asia leads a global recovery- Bloomberg

Don't worry: The BOE will never allow negative interest rates - Daily Telegraph

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