LONDON (Reuters) – Bank of England Deputy Governor Dave Ramsden said he thought the floor for the central bank’s key interest rate was 0.1% but the BoE was “duty-bound” to consider whether it could take rates below zero.
“For me, I see the effective lower bound still at 0.1 which is where Bank Rate is at present,” Ramsden said in an interview with Britain’s Society of Professional Economists posted online.
The BoE, seeking ways to help Britain’s economy through the coronavirus crisis, said this month it would look at how it might be able to implement negative rates if they were needed.
That comment built on an announcement in August that the option of a sub-zero Bank Rate was part of the BoE’s toolbox.
One of the BoE’s nine interest-rate setters, Silvana Tenreyro, said in a newspaper interview published on Saturday that the investigation into whether negative rates might help the economy had found “encouraging” evidence.
Ramsden said in his interview with the SPE that there were some jurisdictions where negative rates appeared to have been more positive than their use in the euro zone and Japan.
He said the BoE was not going to use negative rates imminently and engagement with banks on the possible change would take time.
Ramsden also sounded gloomier about the outlook for Britain’s economy than the BoE’s most recent forecasts.
“For me, when we’re looking at unemployment, it is more likely that unemployment will end up peaking higher than 7.5% than lower, and it will end up coming down more gradually,” he said.
(Reporting by William Schomberg and David Milliken)
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