London Daily

Focus on the big picture.
Sunday, Nov 01, 2026

UK in a ‘different place’ from the euro zone on negative rates, Bank of England says

UK in a ‘different place’ from the euro zone on negative rates, Bank of England says

The U.K. is in a “different place” to continental Europe with regards to the need for negative interest rates, Bank of England Deputy Governor Ben Broadbent has told CNBC.


His comments came after the Bank of England revealed that British banks would need a minimum of six months to prepare for the introduction of a negative interest rate regime, though it clarified this did not mean that further rate cuts were imminent.

Negative rates effectively pay businesses and individuals to borrow money and penalize banks for depositing cash, in theory encouraging them to invest and spend more which can help the economy to grow. However, they exert further downward pressure on banks’ profit margins, which if passed on to customers, could fail to have the desired effect.

In a letter to lenders published Thursday, Sam Woods, the head of the Bank’s Prudential Regulation Authority, said a majority of banks would need time to alter systems and processes and implement strategic or tactical solutions.

Broadbent told CNBC’s “Street Signs Europe” on Friday that this would be similar to the preparation embarked upon euro zone banks in 2014 before the European Central Bank took interest rates below zero for the first time.

“We have been at least in a slightly different place from the ECB, which found itself in 2014 having already had a long period of inflation below target, and indeed inflation expectations dropping below target, and we have not been in that position,” Broadbent said, adding that the bank deemed its current monetary policy “appropriate.”

Since the onset of the coronavirus pandemic, the Bank of England has cut its main lending rate from 0.75% to 0.1%. It left it unchanged at its policy meeting Thursday, along with maintaining its target stock of asset purchases at £895 billion ($1.2 trillion).

Negative rates ‘unlikely’


Despite speculation of negative rates, several analysts have suggested that the central bank may not need to loosen policy any further in the foreseeable future.

Gurpreet Gill, macro strategist for global fixed income at Goldman Sachs Asset Management, said the BOE’s engagement with banks to explore the feasibility of negative rates should not be interpreted as an imminent policy signal, and suggested such a move is unlikely in 2021.

“Secondly, from a broader macro standpoint we don’t regard negative rates — which could adversely impact the banking sector — as an effective tool for downturn periods, even if they are accompanied by a tiered system of reserve remuneration,” Gill added.

She also noted that no central bank that entered the Covid crisis with negative rates has delved further below zero.

“Central banks that haven’t yet ventured into negative rates may not wish to do so in this environment, at least not until the economic recovery is on more solid footing,” she added.


ING Developed Markets Economist James Smith said the standout message from the Bank of England was that its Monetary Policy Committee had “limited enthusiasm” for negative rates. He noted that the meeting minutes published Thursday contained several references to the fact that the news was not a signal that sub-zero rates were forthcoming.

“The Bank’s latest forecasts make it clear policymakers don’t see the need for further stimulus. Its projections now assume the economy will regain all lost ground by the fourth quarter, and that unemployment will only be marginally higher at this point next year,” Smith said in an emailed comment Thursday.

“Inflation is expected to be a little above target for the next couple of years. While some of that in our view may turn out to be a little optimistic, the signal implies that neither a rate cut nor a further expansion in quantitative easing beyond this year is likely, if the Covid-19 story goes as hoped.”

The U.K. is expected to have vaccinated 15 million people in its top four priority groups by mid-February, with vaccines being distributed at a pace that has drawn widespread acclaim.


Vivek Paul, U.K. chief investment strategist at BlackRock Investment Institute, said interest rates have likely entered a “new nominal” in which they remain “rangebound” for some time, owing to material impediments to significant moves higher or lower.

“Indeed, even once we are through the worst of the crisis - and as the vaccine rollout enables a more widespread economic recovery — there will be greater barriers to rates rising due to the heightened sensitivity of government debt servicing costs to rate rises and the increasing willingness of central banks across the globe to look through temporary inflation overshoots,” Paul said.

He added that given the pace of vaccine distribution, current policy support should be able to provide a bridge to either spring or summer for an emergence from the pandemic.

“Now, with all eyes on the path of the recovery and with the uncertainty of a no-deal Brexit firmly in the rear-view mirror, we see internationally focused U.K. large-cap stocks as an attractive proposition on valuation grounds and a route to accessing the global post-Covid recovery story,” he concluded.

Newsletter

Related Articles

0:00
0:00
Close
Home Office Expands Border Security Operations and Intelligence Sharing With European Partners
Office for National Statistics Reports Modest Retail Sales Growth Ahead of Crucial Christmas Trading Season
Welsh Government Unveils Strategic Plan to Boost Regional Technology Innovation and Digital Skills Training
Department for Environment Food and Rural Affairs Implements New Agricultural Subsidies Framework for English Farmers
Scottish First Minister John Swinney Announces Major Regional Infrastructure and Green Energy Investment Strategy
National Health Service Leaders Warn of Severe Winter Pressures and Mounting Accident and Emergency Backlogs
Bank of England Monetary Policy Committee Signals Cautious Interest Rate Path Amid Persistent Services Inflation
Chancellor of the Exchequer Rachel Reeves Finalizes Autumn Budget Framework Aiming to Close Public Sector Fiscal Gap
Department for Science, Innovation and Technology Prepares Enhanced Artificial Intelligence Safety and Cyber Defense Frameworks
United Kingdom Government Expands International Sanctions Framework Against Russian Shadow Fleet and Financial Enablers
Institute of Directors Reports Sharp Post-Budget Drop in Business Confidence Despite Long-Term Investment Intention Shifts
Chancellor John Healey Defends Sweeping Fiscal Adjustments and Household Support Packages Following Autumn Budget
Parliamentary Petitions Committee Schedules Major Legislative Debates on Special Educational Needs and Non-Stun Meat Labelling
Regional Devolution and Good Growth Fund Frameworks Reshape Local Government Funding Across English Regions
Loughborough University Economic Analysts Highlight Substantial Uncertainty Surrounding Public Sector Efficiency Savings
British Legal Sector Drives Sixty Billion Pounds in Annual Economic Output While Employing Over Half a Million Professionals
Law Society Welcomes New Better Regulation Executive While Pressing for Long-Term Legal Aid Funding Reform
Metropolitan Police and Security Services Heighten Operations Across London Ahead of Large-Scale Public Demonstrations
Bank of England Economists Scrutinize Corporate Tax Adjustments and Public Sector Borrowing Pressures
Chancellor John Healey Defends Autumn Budget Tax and Spending Allocations Following Intense Parliamentary Scrutiny
Department for Environment, Food and Rural Affairs Implements Strict Water Quality Monitoring Rules Following Severe Rainfall and Flooding
Welsh Government Unveils Comprehensive Regional Housing Strategy to Address Rural Affordability and Homelessness Pressures in Cardiff
Office for National Statistics Reports Slowing Consumer Price Inflation and Steady Retail Performance Across United Kingdom Markets
Northern Ireland First Minister Michelle O'Neill and Deputy First Minister Emma Little-Pengelly Advance Cross-Border Infrastructure Agreement in Belfast
Competition and Markets Authority Launches Formal Investigation Into Artificial Intelligence Partnerships Involving Major Technology Corporations
Scottish First Minister John Swinney Secures Cross-Party Support for Devolved Budget Framework and Renewable Energy Expansion
High Court Rules in Favor of Environmental Campaigners Over Department for Energy Security and Net Zero Licensing Procedures
National Health Service England Announces Major Digital Modernization and Artificial Intelligence Diagnostic Rollout Across Regional Trusts
Bank of England Monetary Policy Committee Signals Cautious Approach to Interest Rate Cuts Amid Persistent Wage Growth and Inflation Pressures
British Prime Minister Keir Starmer and Chancellor Rachel Reeves Outline Strategic Infrastructure Plans to Boost Regional Growth and Private Investment
Water pollution remains high despite £5bn investment
Regional Economic Divergence and Industrial Transformation
Technological Sovereignty and Regulatory Scrutiny
Fiscal Consolidation and Public Service Pressures
Automotive Industry Leadership Warns of Imminent Supply Chain Disruptions Following Recent European Trade Negotiations
High Court Delivers Landmark Ruling Affirming Strict Legal Protections for Corporate Data Privacy Against State Surveillance
Welsh First Minister Eluned Morgan Secures Additional Funding for Regional Transport Infrastructure and Rail Modernization
Scottish First Minister John Swinney Announces Major Green Energy Infrastructure Investment Package for Aberdeen
Department for Work and Pensions Proposes Sweeping Welfare Reforms to Incentivize Long-Term Unemployed Back into Work
Competition and Markets Authority Launches Formal Investigation into Artificial Intelligence Partnerships Involving Major Tech Giants
United Kingdom Foreign Secretary David Lammy Concludes High-Level Strategic Talks in Washington on Middle East Security
National Health Service England Unveils Emergency Winter Resilience Plan to Combat Projected Surge in Emergency Admissions
Bank of England Governor Andrew Bailey Signals Cautious Approach to Interest Rate Cuts Amid Persistent Inflation
British Chancellor Rachel Reeves Finalizes Corporate Tax Overhaul Ahead of Autumn Budget to Fund Public Services
Automotive Manufacturers Urge Government Action as High Energy Costs and Global Supply Chain Disruptions Threaten Production
Metropolitan Police Issue Formal Apology Following Inadvertent Release of Confidential Information During High-Profile Investigation
Scottish Finance Secretary Shona Robison Unveils Devolved Budget Highlighting Housing and Public Service Adjustments
Energy Regulator Office of Gas and Electricity Markets Prepares to Remove Household Gas Standing Charges Following Treasury Mandate
Treasury Confirms Reversal of Planned Cash Individual Savings Account Allowance Reduction Protecting Twenty Thousand Pound Limit
Office for Budget Responsibility Revisions Predict Moderate United Kingdom Economic Growth with Elevated Inflation Pressures
×