Bank of England is Evaluating the Possibility of Negative Rates
On Monday, the Bank of England surveyed banks to determine their readiness for zero or negative interest rates, according to CNBC.
Last month, the Bank of England (BoE) announced that it was evaluating how to take rates negative if needed. Other central banks have turned to negative rates in an attempt to stimulate the economy. “As part of this work, we are requesting specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration – and the steps that you would need to take to prepare for the implementation of these,” Deputy BoE Governor Sam Woods said.
Woods also wanted to analyze any roadblocks with technology that might hinder the implementation of zero or negative rates. “We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes,” he said. The BoE is asking banks to respond by November 12.
Last week, money markets eased up on bets that the central bank will take rates below zero in May 2021, instead of March. The BoE's benchmark rate was cut to a record low of 0.1 percent in March amid the pandemic. Governor Andrew Bailey stated that just because the central bank was assessing interest rates, didn't mean that it was guaranteed.