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BoE mulls negative interest rates

BoE mulls negative interest rates
The Bank of England would consider bringing in negative interest rates, a top official said today.

Deputy governor Paul Tucker admitted the introduction of negative interest rates would be an "extraordinary thing to do", but said it was an option that the Bank would consider.

“I hope we will think about whether there are constraints to setting negative interest rates," Mr Tucker told the Treasury Select Committee.

"This is an idea I have raised. This would be an extraordinary thing to do and it needs to be thought through very carefully.”

The Prime Minister's spokesman this afternoon responded to the idea, saying it was a matter for the Bank of England to consider itself.

However the spokesman added that the current plan of tight fiscal policy coupled with a more expansive monetary policy was "the right approach" to take.

He also said the Bank was open to providing more quantitative easing and will consider introducing negative interest rates, the Bank’s deputy governor said this morning.

The Bank has so far bought £375bn worth of government bonds, and Paul Tucker said further monetary stimulus was possible in the future.

“Nobody on this committee thinks that QE has reached the end of the road and that it is not a useful instrument anymore, and we stand prepared to do more if we judge that necessary,” he said of Monetary Policy Committee.

Mr Tucker also predicted that the money already pumped into the economy would have a more tangible effect in coming years as the economic picture settles down after the financial crash.

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