Central Banks

Bank of England's latest statement was no negative rate hint, governor says

Key Points
  • New COVID-19 cases are rising by at least 6,000 a day in Britain, according to week-old data, hospital admissions are doubling every eight days, and the testing system is buckling.
  • The Bank of Japan and the European Central Bank have cut rates below zero to deter banks from parking cash at the central banks and instead lend it out to boost growth.
Bank of England Governor Andrew Bailey.
Jason Alden / Bloomberg / Getty Images

Bank of England Governor Andrew Bailey warned on Tuesday that escalating COVID-19 cases in Britain threatened the outlook for Britain's economy and said the central bank was looking hard at how it could support the economy further.

There were "hard yards" to come and that the BOE would do everything it could to support the economy, Bailey said at an online talk hosted by the British Chambers of Commerce.

New COVID-19 cases are rising by at least 6,000 a day in Britain, according to week-old data, hospital admissions are doubling every eight days, and the testing system is buckling.

"Obviously that does reinforce the downside risks," Bailey said and said the pace of increase was "very unfortunate".

Bailey stressed that last week's monetary policy statement was not a hint that the BOE would implement a negative Bank Rate, but he repeated that it was part of the central bank's toolbox and the BOE needed to know how to implement it.

"It doesn't imply anything about the possibility of us using negative instruments," he said. "We have looked hard at the question of what scope is to cut interest rates further and particularly negative interest rates."

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The Bank of Japan and the European Central Bank have cut rates below zero to deter banks from parking cash at the central banks and instead lend it out to boost growth.

Bailey described the experience of other countries' use of negative rates as "mixed", with its effectiveness depending on the structure of the banking system and the timing of the move.