Bank of England mulls negative interest rates
People across Britain could see their savings hit or face new charges on their current accounts after a senior official at the Bank of England proposed the “extraordinary” measure of imposing negative interest rates on banks.
Deputy Governor Paul Tucker said the idea of charging high street banks to store money centrally, rather than paying them interest, should be explored as a way of easing the flow of credit to the stagnant economy.
“I hope we will think about whether there are constraints to setting negative interest rates,” he told MPs on the Treasury Select Committee. Although such a move has been discussed by the Bank of England in the past, Mr Tucker’s comments are the strongest indication yet that it is under serious consideration.
It is hoped that the prospect of negative interest rates would encourage banks to lend more – but analysts warned that it would dent banks’ profitability and that the sector would probably respond by cutting interest rates on savings accounts, or even introducing current account charges.
“It’s very clear this would be expected to bring downward pressure on the rates savers can expect, pushing them down towards zero,” said Malcolm Barr of JP Morgan.
It is thought that the banks would seek to make a profit by lending the funds out to companies and households. The Swedish central bank imposed negative interest rates in 2009 with this goal in mind.
thats right..you pay them for the convenience of allowing them to use your money..the brave new world..