BBC/Telegraph: Bank of England’s Silvana Tenreyro supports negative interest rates

A Bank of England (BoE) policymaker has defended the potential use of negative interest rates, which could take the cost of borrowing below zero.

Silvana Tenreyro told the Sunday Telegraph that evidence from other countries was “encouraging”.

On Tuesday, the BoE governor played down the prospect of taking rates below zero, insisting it just needed to make sure it could do so if needed.

The Bank has so far responded to the pandemic by cutting rates to just 0.1%.

If interest rates are negative, the BoE charges for any deposits it holds on behalf of the banks. That encourages banks to lend the money to business rather than deposit it.

In an interview with the newspaper, Ms Tenreyro – an external member of the Bank’s Monetary Policy Committee – said that evidence from other European countries and Japan suggested that negative interest rates had succeeded in cutting firms’ borrowing costs and that banks would cope with the extra pressure on their finances, despite coronavirus.

The full BBC article is available at https://www.bbc.com/news/business-54314971

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