London Daily

Focus on the big picture.
Saturday, Jul 18, 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
For 36 Years, He Scammed About 300 Luxury Hotels — Until He Was Caught
Britain Nationalises British Steel to Protect Scunthorpe Production and Strategic Supply
Andy Burnham Takes Labour Leadership and Prepares to Become Britain’s Seventh Prime Minister in a Decade
Tech Companies Want to Move Computing Off Your Screen and Onto Your Body
White House Teleprompter Operator Earned More Than $100,000 From Bets Linked to the President's Speeches
French Prime Minister Survives No-Confidence Vote After Controversial Budget Cuts
European Commission Opens Excessive Deficit Procedure Against France
French Senate Blocks Key Immigration Reform Measures
French Government Pushes EU Action Against Ultra-Fast Fashion Imports
French Parliament Debates Expanded Autonomy Powers for Corsica
France Reopens Autonomy Talks With New Caledonia After Months of Unrest
Bordeaux Wine Producers Seek Three Hundred Million Euro Aid Package After Export Collapse
French Farmers Block Spain Border Crossings Over Imported Food Competition
Cannes Film Festival Bans Fully Artificial Intelligence-Generated Films From Competition
TotalEnergies Shifts More Than Three Billion Euros of Green Investment From Europe to the United States
LVMH Chief Executive Bernard Arnault Presents Succession Plan for Luxury Empire
Kering Reports Fifteen Percent Revenue Drop as Chinese Luxury Demand Weakens
Sanofi Reports Positive Results From Messenger RNA Respiratory Vaccine Trials
France Places Energy Price Caps Under Review to Protect Households Through Winter
EDF Connects Two New Nuclear Reactors to France’s Electricity Grid
Mistral Secures European Commission Contract for Sovereign Artificial Intelligence Models
Renault Opens Next-Generation Electric Battery Plant in Northern France
Air France Signs Two Billion Euro Sustainable Aviation Fuel Deal to Cut Emissions
Marseille Launches Three Billion Euro Port Expansion to Strengthen Mediterranean Trade Role
French-Owned Ubisoft Announces Global Restructuring With Nearly One Thousand Job Cuts
National Railway Operator Suspends Artificial Intelligence Ticket Pricing System After Consumer Backlash
United Kingdom to Ban Sales of High-Caffeine Energy Drinks to Under-Sixteens
Home Office Designates Iranian and Russian Paramilitary Groups as National Security Threats
National Health Service Launches Housing Plan to Retain London Healthcare Workers
British Heatwave Fuels Wildfires and Emergency Evacuations in Scotland
United Kingdom and Estonia Sign Defence Agreement to Strengthen NATO’s Eastern Flank
United Kingdom Cuts Bilateral Aid to African Nations by More Than Eighty Percent
Bank of England Overhauls Banking Rules to Encourage More Lending to Businesses
United Kingdom and India Free Trade Agreement Enters Into Force, Reshaping Bilateral Economic Ties
Andy Burnham Confirmed as New Labour Leader and Prime Minister-Designate
UK Government Faces Pressure Over Extreme Heat Workplace Rules
Lewisham Council Blocks Cooperation With Home Office Immigration Enforcement
UK Parliament Investigates Growing Pressures on Scotch Whisky Industry
Teen Hackers Sentenced Over Thirty-Nine Million Pound Transport for London Cyber Attack
Ministry of Defence Acquires Scottish Fuel Terminal to Strengthen Royal Navy Operations
Bank of England Eases Rules as Economic Growth Remains Weak
Bank of England Governor Warns Andy Burnham on Britain’s Long Economic Stagnation
UK Defence Ministry Buys Scottish Fuel Terminal to Secure Naval Energy Supplies
UK Secures Access to European Defence Contracts Through Ukraine Support Deal
Bank of England Plans Easier Capital Rules to Encourage More Lending
Met Office Says England and Wales Have Already Broken Summer Heat Records
Counter-Terrorism Police Lead Investigation Into Murder of Former Minister Ann Widdecombe
UK Government Nationalises British Steel to Protect Domestic Steel Production
French National Assembly Overrides Senate to Pass Historic Assisted-Dying Legislation
Spanish Prime Minister's Wife Ordered to Stand Trial as Corruption Probes Encircle Governing Party
×