Haldane Joins BOE Pushback on Negative Interest-Rate Speculation

(Bloomberg) -- Bank of England Chief Economist Andy Haldane said an analysis of negative interest rates will probably take months, reinforcing the central bank’s pushback against speculation about interest-rate cuts being imminent.

Haldane said Wednesday the BOE’s decision to examine how to take the benchmark below zero wasn’t a signal about the likelihood of that happening. The comments come a day after Governor Andrew Bailey said the central bank hasn’t reached any judgment on whether to introduce the policy.

Once the work is completed, “judgments on negative rates will depend on the economic outlook at the time and in particular on whether that necessitates further monetary stimulus,” Haldane said in a speech.

The other factor, he said, is “whether the balance of costs and benefits from using this tool was positive and whether this cost/benefit balance favored negative rates over other monetary tools.” That echoes a point made by Bailey about side effects because of the size and the structure of the U.K. financial system.

Speculation about negative rates has rumbled on for months, but has ramped up since the BOE said it would examine the operational implications of such a move. Bailey has since said the BOE is just doing “groundwork” on a potential future tool, without making any commitments.

Other factors playing in the discussion are the resurgence of the coronavirus, rising unemployment and the potential for a messy Brexit.

A number of policy makers have pushed back against the idea that action on interest rates is imminent. However, external member Silvana Tenreyro said banks “adapted well” in other countries, and the evidence is “encouraging.”

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