Bank of England 'considering negative interest rates'

27 February 2013

Policymakers at the Bank of England (BoE) have considered the idea of implementing negative interest rates in the UK.

That is according to Paul Tucker, deputy governor of the central institution, who has revealed that officials at the Monetary Policy Committee (MPC) are concerned about the fact banks are still not lending enough to smaller businesses.

Britain's base rate has been on hold at a historical low level of 0.5 per cent since March 2009, but Mr Tucker told the Treasury Select Committee yesterday (26 February) that MPC members have floated the drastic idea of lowering this figure to sub-zero levels.

"This is an idea that I have raised. This would be an extraordinary thing to do. It needs to be thought through very carefully," he noted.

However, the deputy governor went on to insist this does not mean he has dismissed the idea of introducing more quantitative easing (QE) if this is needed in the future.

"I remain open to doing more QE depending on the outlook for demand and inflation," he added.

By Asim Shah

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