Bailey Says Bank Of England Not Ruling Out Negative Interest Rates

bankofenglandandrewbailey dec20 20may20 lt

Bank of England Governor Andrew Bailey said the UK central bank is currently reviewing all its tools and it would be foolish to rule out any one of them, including negative interest rates.

"We do not rule things out as a matter of principle," Bailey told lawmakers at a Treasury committee hearing on Wednesday.

Specifically on negative interest rates, the BoE Chief said, "We're not ruling it in, and we're not ruling it out."

UK interest rates are now at a record low 0.1 percent.

Bailey said policymakers are studying the experience of other central banks with negative rates. The Bank of Japan and the European Central Bank have negative interest rates.

BoE Deputy Governor Ben Broadbent, who was also present at the hearing, hinted that the recovery could be shaped like a a 'lopsided' V.

The policymaker said that the recovery is unlikely to be immediate, but a longer term process.

Official data released last week showed that that GDP dropped 2 percent in the first quarter of 2020, which was the worst fall since the global financial crisis of 2008.

The think tank NIESR has predicted that UK GDP is set to fall 25-30 percent in the second quarter, due to the impact of the coronavirus, or Covid-19, and the lockdown imposed to curb the pandemic.

Elsewhere on Wednesday, the UK government sold a long-term bond at negative yield for the first time.

The government reportedly auctioned off GBP 3.75 billion of three-year bonds at an average yield of -0.003 percent.

Britain had sold short-term debt at negative yield in 2016.

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