Ramsden Says BOE Isn’t About to Use Negative Rates Imminently

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The Bank of England won’t implement negative interest rates in the near future, according to Deputy Governor Dave Ramsden, who also cast doubt on the need to do so at all by saying he sees the effective lower bound at 0.1% -- the current level.

While the option to cut rates below zero is within the central bank’s toolbox, there is still a lot to investigate on how it could be implemented, Ramsden said in an interview with the Society of Professional Economists dated Sept. 20.

“We’re not about to use them imminently,” he said. “It’s going to take time to do this work, this engagement with the banks and others. We do have a quantitative-easing program currently in flight. We come back to all these considerations at each meeting.”

Money markets briefly pared bets on the next 10 basis points of easing, pushing back the timing of a rate cut to 0% to June from May. However, bets for May easing quickly returned.

Ramsden also said the BOE’s range of forecasts produced in August, represented by fan charts, didn’t assume for a further national lockdown, although did allow for a range of local restrictions.

Silvana Tenreyro, a colleague on the Monetary Policy Committee colleague, told the Telegraph newspaper at the weekend that she sees “encouraging” evidence on the policy. There has been “almost full pass-through of negative rates into lending rates in most countries,” she said.

BOE Governor Andrew Bailey last week played down the prospect of negative rates being used any time soon. He said the policy is in the toolbox but that “doesn’t imply anything about the probability of us using” it.

©2020 Bloomberg L.P.

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