Rates of change

19 May 2020 By Liam Proud Follow @liamwardproud

British rate-setters including BoE Chief Economist Andy Haldane are contemplating taking policy rates below zero. Bank margins would suffer, but big ones like Barclays have more fee income to rely on. Stragglers like Virgin Money and Metro may have to put themselves up for sale.

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The Bank of England is looking more urgently at negative interest rates and buying riskier assets, Chief Economist Andy Haldane told the Daily Telegraph in an interview published on May 16.

“The economy is weaker than a year ago and we are now at the effective lower bound, so in that sense it’s something we’ll need to look at – are looking at – with somewhat greater immediacy,” he said.

BoE Governor Andrew Bailey, speaking during a May 14 webinar organised by the Financial Times, said taking rates below zero “is not something we are currently planning for or contemplating,” but added that it was not wise to rule anything out.

UK government two-year bond yields, which are highly sensitive to interest-rate expectations, dipped below zero on May 18.

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