Negative interest rates? I mean, it is the Bank of England but how long before it washes up on our shores?
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.