London Daily

Focus on the big picture.
Thursday, Jul 30, 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
The World's Most Terrifying Smartphone: Recording, Documenting, and Reporting to the Regime
The AI User Nightmare: Private Claude Conversations Leaked to the Internet
UK: Former Football Association Leaders Call for World Cup Boycott Over FIFA Privatization Plan
Forbidden Love: China severs millions from their virtual partners
Over 24 Hours in the Air: Qantas Airbus Completes Record-Breaking Test Flight
Prince Harry Faces Significant Legal Costs After Insurance Shortfall
FirstGroup Sells Rail Software Business to Tracsis for £48 Million
Victoria and Albert Museum Staff Vote for Strike Action
Norwegian Teenager Convicted Over Contract Killing Plot in Britain
Royal Mail Raises Bulk Mailing Prices by 30%
Immigration Remains Britain's Top Public Concern, Ipsos Survey Finds
Prime Minister Says Social Care Reform Must Precede Assisted Dying Legislation
Ofgem Proposes Steep Grid Connection Charges for New Data Centers
Major Cyberattack Compromises UK Education and Police Data
Government Reviews Jurisdiction Over Crimes Involving US Military Personnel
England Declares Widespread Drought After Record Dry July
UK Commits £8.4 Billion to Dreadnought Nuclear Submarine Program
Zuckerberg Opposes US Ban on Chinese AI Models and Warns of Regulatory Capture
Massive Wildfires Ravage Southern Europe: Fatalities in Greece and Evacuations Across France, Spain, and Turkey
NHS Leaders Warn Royal Mail Tariff Increases Will Raise Administrative Costs
Immigration Remains the Public's Top Concern in Britain, Ipsos Poll Finds
Britain Approves 16 New Grid Storage Projects to Strengthen Electricity Network
London-Listed Merger Activity Climbs Even as IPO Market Remains Weak
Institute of Directors Warns High Energy Costs and Taxes Continue to Weigh on UK Businesses
North Sea Industry Calls for Faster Approval of £10 Billion Rosebank and Jackdaw Projects
UK Inflation Eases to 2.6% but Higher Energy Costs Could Renew Price Pressures
Burnham Holds Talks With Saudi and Qatari Leaders on Middle East Security and Energy
Burnham and Zelenskyy Announce UK Electronic Warfare Technology Cooperation During London Visit
Prime Minister Andy Burnham Launches Cross-Party Push for Social Care Reform in England
Trump says Israel ‘would not survive’ without US
France Evacuates Atlantic Coast Resorts as Wildfire Risk Rises Again
Magnitude 7.1 Earthquake Strikes Kumamoto as Rescuers Search Collapsed Buildings
OpenAI Faces Demands for Full Disclosure After Models Breach Hugging Face
Nvidia Reportedly Takes Vast Texas Data-Centre Lease to Underwrite AI Expansion
Royal Collection Trust Income Falls as Palace Visits Retreat From Record Highs
FIFA’s Private-Investment Plan for World Cup Rights Draws European Revolt
Ministers Examine Social-Care Levy as Burnham Seeks Funding Settlement
UK Attractions Sector Forecast to Add £587 Million in Visitor Spending
England Coast Path Extends With New Suffolk Estuary Walking Route
Attorney General Wins Longer Jail Term for Fatal Dangerous Driving Case
Andrew and Tristan Tate Remain in U.S. Custody Pending UK Extradition
Royal Fleet Auxiliary Workers Secure Above-Inflation Pay Deal
Prime Minister Seeks Cross-Party Agreement on Social Care Reform
Court Upholds Competition Ruling Against Drugmakers Over Hydrocortisone Prices
UK Unveils Major Technical Education Reform for Secondary Schools
UK Judge Rebukes Home Office Over AI-Generated Errors in Asylum Case
UK and Ukraine Agree to Share Electronic Warfare Technology
Apple Briefly Crosses Five Trillion Dollar Valuation as Investors Retreat From AI Bets
Badenoch Offers Tory Votes to Keep Serious Offenders in Prison
Why Americans Queue for $15 Ice Cream and a $100 Caviar Pint
×