London Daily

Focus on the big picture.
Monday, Sep 08, 2025

Bank of England policymaker defends negative rates

Bank of England policymaker defends negative 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.

What are negative interest rates?


The term "interest rates" is often used interchangeably with the Bank of England base rate.

Described as the "single most important interest rate in the UK", the base rate determines how much interest the Bank of England pays to financial institutions that hold money with it, and what it charges them to borrow.

High Street banks also use it to determine how much interest they pay to savers, as well as what they charge people who take out a loan or mortgage.

The Bank of England usually lowers interest rates when it wants people to spend more and save less.

In theory, taking interest rates below zero should have the same effect. But in practice, it's a bit more complicated.

"There has been almost full pass-through of negative rates into lending rates in most countries," Ms Tenreyro said.

She added that "banks adapted well" and that their profitability had increased where the policy had been introduced.

But earlier this week, BoE Governor Andrew Bailey played down the idea of taking rates below zero in the near future, and described the experience of other countries as a "mixed bag".

Mr Bailey said on Tuesday: "It would be a cardinal sin in my view if we said we had a tool in the box which we didn't think could be operationally used.

"Yes it's in the tool bag, but that doesn't mean we're going to use negative rates," he added.

The Bank said in August that it was taking a closer look at the case for cutting interest rates even further. In September it also said that it would take a detailed look at how negatives interest rates might work in practice during the last three months of the year.

It has already cut interest rates to 0.1%, a record low, and pumped billions of pounds into the UK economy in a bid to fight the coronavirus-induced downturn.

'Interrupted' recovery


Ms Tenreyro also said that the potential for more local lockdowns could, however, slow down or "interrupt" the UK's economic recovery.

She suggested it will be shaped like an "interrupted, incomplete V", at odds with other more upbeat forecasts.

Speaking on a British Chambers of Commerce web conference on Tuesday, Mr Bailey also urged caution over the "hard yards ahead" as the UK faces a rising number of Covid-19 infections.

He said: "The latest news, that we are seeing a very unfortunate, faster return of Covid-19, is extremely difficult news for all of us and the whole country.

"That does reinforce the downside risks we have in our forecasts.

"The Bank of England will do everything we can within our remit and powers to support the businesses and people of this country."

Newsletter

Related Articles

0:00
0:00
Close
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
Elon Musk Poised to Become First Trillionaire Under Ambitious Tesla Pay Plan
France, at an Impasse, Heads Toward Another Government Collapse
Burning the Minister’s House Helped Protesters to Win Justice: Prabowo Fires Finance Minister in Wake of Indonesia Protests
Brazil Braces for Fallout from Bolsonaro Trial by corrupted judge
The Country That Got Too Rich? Public Spending Dominates Norway Election
Nearly 40 Years Later: Nike Changes the Legendary Slogan Just Do It
Generations Born After 1939 Unlikely to Reach Age One Hundred, New Study Finds
End to a four-year manhunt in New Zealand: the father who abducted his children to the forests was killed, the three siblings were found
Germany Suspends Debt Rules, Funnels €500 Billion Toward Military and Proxy War Strategy
EU Prepares for War
BMW Eyes Growth in China with New All‑Electric Neue Klasse Lineup
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
US Justice Department Launches Criminal Mortgage-Fraud Probe into Federal Reserve Governor Lisa Cook
Escalating Drug Trafficking and Violence in Latin America: A Growing Crisis
US and Taiwanese Defence Officials Held Secret Talks in Alaska
Report: Secret SEAL Team 6 Mission in North Korea Ordered by Trump in 2019 Ended in Failure
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Florida Murder Case: The Adelson Family, the Killing of Dan Markel, and the Trial of Donna Adelson
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
Big Tech Executives Laud Trump at White House Dinner, Unveil Massive U.S. Investments
Tether Expands into Gold Sector with Profit-Driven Diversification
‘Looks Like a Wig’: Online Users Express Concern Over Kate Middleton
Brand-New $1 Million Yacht Sinks Just Fifteen Minutes After Maiden Launch in Turkey
Here’s What the FBI Seized in John Bolton Raid — and the Legal Risks He Faces
Florida’s Vaccine Revolution: DeSantis Declares War on Mandates
Trump’s New War – and the ‘Drug Tyrant’ Fearing Invasion: ‘1,200 Missiles Aimed at Us’
"The Situation Has Never Been This Bad": The Fall of PepsiCo
At the Parade in China: Laser Weapons, 'Eagle Strike,' and a Missile Capable of 'Striking Anywhere in the World'
The Fashion Designer Who Became an Italian Symbol: Giorgio Armani Has Died at 91
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Queen Camilla’s Teenage Courage: Fended Off Attempted Assault on London Train, New Biography Reveals
Scottish Brothers Set Record in Historic Pacific Row
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Court of Appeal Allows Asylum Seekers to Remain at Essex Hotel Amid Local Tax Boycott Threats
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
×