London Daily

Focus on the big picture.
Friday, Aug 22, 2025

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
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
MSNBC Rebrands as MS NOW Amid Comcast’s Cable Spin-Off
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
William and Kate Are Moving House – and the New Neighbors Were Evicted
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
Taylor Swift on the Way to the Super Bowl? All the Clues Stirring Up Fans
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Apple Expands Social Media Presence in China With RedNote Account Ahead of iPhone 17 Launch
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Cambridge Dictionary Adds 'Skibidi,' 'Delulu,' and 'Tradwife' Amid Surge of Online Slang
Bill Barr Testifies No Evidence Implicated Trump in Epstein Case; DOJ Set to Release Records
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
The CEO Who Replaced 80% of Employees for the AI Revolution: "I Would Do It Again"
Emails Worth Billions: How Airlines Generate Huge Profits
Character.ai Bets on Future of AI Companionship
China Ramps Up Tax Crackdown on Overseas Investments
Japanese Office Furniture Maker Expands into Bomb Shelter Market
Intel Shares Surge on Possible U.S. Government Investment
Hurricane Erin Threatens U.S. East Coast with Dangerous Surf
EU Blocks Trade Statement Over Digital Rule Dispute
EU Sends Record Aid as Spain Battles Wildfires
JPMorgan Plans New Canary Wharf Tower
Zelenskyy and his allies say they will press Trump on security guarantees
Beijing is moving into gold and other assets, diversifying away from the dollar
Escalating Clashes in Serbia as Anti-Government Protests Spread Nationwide
The Drought in Britain and the Strange Request from the Government to Delete Old Emails
Category 5 Hurricane in the Caribbean: 'Catastrophic Storm' with Winds of 255 km/h
"No, Thanks": The Mathematical Genius Who Turned Down 1.5 Billion Dollars from Zuckerberg
The surprising hero, the ugly incident, and the criticism despite victory: "Liverpool’s defense exposed in full"
Digital Humans Move Beyond Sci-Fi: From Virtual DJs to AI Customer Agents
YouTube will start using AI to guess your age. If it’s wrong, you’ll have to prove it
Jellyfish Swarm Triggers Shutdown at Gravelines Nuclear Power Station in Northern France
×