London Daily

Focus on the big picture.
Tuesday, Jan 13, 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
Meghan Markle Could Return to the UK for the First Time in Nearly Four Years If Security Is Secured
Meghan Markle Likely to Return to UK Only if Harry Secures Official Security Cover
UAE Restricts Funding for Emiratis to Study in UK Amid Fears Over Muslim Brotherhood Influence
EU Seeks ‘Farage Clause’ in Brexit Reset Talks to Safeguard Long-Term Agreement Stability
Starmer’s Push to Rally Support for Action Against Elon Musk’s X Faces Setback as Canada Shuns Ban
UK Free School Meals Expansion Faces Political and Budgetary Delays
EU Seeks ‘Farage Clause’ in Brexit Reset Talks With Britain
Germany Hit by Major Airport Strikes Disrupting European Travel
Prince Harry Seeks King Charles’ Support to Open Invictus Games on UK Return
Washington Holds Back as Britain and France Signal Willingness to Deploy Troops in Postwar Ukraine
Elon Musk Accuses UK Government of Suppressing Free Speech as X Faces Potential Ban Over AI-Generated Content
Russia Deploys Hypersonic Missile in Strike on Ukraine
OpenAI and SoftBank Commit One Billion Dollars to Energy and Data Centre Supplier
UK Prime Minister Starmer Reaffirms Support for Danish Sovereignty Over Greenland Amid U.S. Pressure
UK Support Bolsters U.S. Seizure of Russian-Flagged Tanker Marinera in Atlantic Strike on Sanctions Evasion
The Claim That Maduro’s Capture and Trial Violate International Law Is Either Legally Illiterate—or Deliberately Deceptive
UK Data Watchdog Probes Elon Musk’s X Over AI-Generated Grok Images Amid Surge in Non-Consensual Outputs
Prince Harry to Return to UK for Court Hearing Without Plans to Meet King Charles III
UK Confirms Support for US Seizure of Russian-Flagged Oil Tanker in North Atlantic
Béla Tarr, Visionary Hungarian Filmmaker, Dies at Seventy After Long Illness
UK and France Pledge Military Hubs Across Ukraine in Post-Ceasefire Security Plan
Prince Harry Poised to Regain UK Security Cover, Clearing Way for Family Visits
UK Junk Food Advertising Ban Faces Major Loophole Allowing Brand-Only Promotions
Maduro’s Arrest Without The Hague Tests International Law—and Trump’s Willingness to Break It
German Intelligence Secretly Intercepted Obama’s Air Force One Communications
The U.S. State Department’s account in Persian: “President Trump is a man of action. If you didn’t know it until now, now you do—do not play games with President Trump.”
Fake Mainstream Media Double Standard: Elon Musk Versus Mamdani
HSBC Leads 2026 Mortgage Rate Cuts as UK Lending Costs Ease
US Joint Chiefs Chairman Outlines How Operation Absolute Resolve Was Carried Out in Venezuela
Starmer Welcomes End of Maduro Era While Stressing International Law and UK Non-Involvement
Korean Beauty Turns Viral Skincare Into a Global Export Engine
UK Confirms Non-Involvement in U.S. Military Action Against Venezuela
UK Terror Watchdog Calls for Australian-Style Social Media Ban to Protect Teenagers
Iranian Protests Intensify as Another Revolutionary Guard Member Is Killed and Khamenei Blames the West
Delta Force Identified as Unit Behind U.S. Operation That Captured Venezuela’s President
Europe’s Luxury Sanctions Punish Russian Consumers While a Sanctions-Circumvention Industry Thrives
Berkshire’s Buffett-to-Abel Transition Tests Whether a One-Man Trust Model Can Survive as a System
Fraud in European Central Bank: Lagarde’s Hidden Pay Premium Exposes a Transparency Crisis at the European Central Bank
Trump Announces U.S. Large-Scale Strike on Venezuela, Declares President Maduro and Wife Captured
Tesla Loses EV Crown to China’s BYD After Annual Deliveries Decline in 2025
UK Manufacturing Growth Reaches 15-Month Peak as Output and Orders Improve in December
Beijing Threatened to Scrap UK–China Trade Talks After British Minister’s Taiwan Visit
Newly Released Files Reveal Tony Blair Pressured Officials Over Iraq Death Case Involving UK Soldiers
Top Stocks and Themes to Watch in 2026 as Markets Enter New Year with Fresh Momentum
No UK Curfew Ordered as Deepfake TikTok Falsely Attributes Decree to Prime Minister Starmer
Europe’s Largest Defence Groups Set to Return Nearly Five Billion Dollars to Shareholders in Twenty Twenty-Five
Abu Dhabi ‘Capital of Capital’: How Abu Dhabi Rose as a Sovereign Wealth Power
Diamonds Are Powering a New Quantum Revolution
Trump Threatens Strikes Against Iran if Nuclear Programme Is Restarted
Apple Escalates Legal Fight by Appealing £1.5 Billion UK Ruling Over App Store Fees
×