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BOE discusses applying negative interest rates

BOE discusses applying negative interest rates

The Bank of England asked on Monday trade banks at home about their willingness to apply zero or negative interest rates. This step came last month the BOE said it studied how to apply the negative interest rates in Britain and its impact on the banking and investment sectors.  

The BOE is trying to carry out the same monetary stance adopted by other global central banks that have resorted to the zero or negative interest rates in order to prompt commercial banks to increase their lending processes. 

The British Bank also identified a final date of November 12, after a week of the following policy announcement, for banks to respond. 

The central bank also explained that it requested specific information on the ability of banks and companies and their preparation to deal with the price of zero or negative interest, and steps they may need to apply such a new policy on the British cash system. 

Vice President of the British Central Bank asked the commercial banks whether they would face any of the technological challenges to apply zero or negative rates. The BOE needs to understand if there was a potential to resort to short-term solutions or permanent changes in financial and banking systems. 

The BOE interest rate has been reduced to the value of the standard interest of 0.1% in March to help the economy during the Coronavirus crisis. 

The next step is expected to be increase in the bond purchase program worth 745 billion pounds ($ 972.00 billion) at the next November meeting. 

On the other hand, investors were betting last week that interest rates would fall below zero in May 2021, instead of March. 

As for the sterling, its highest level in a month at 1.3058 against the US dollar, before returning to trade around today’s open price at 1.3022.

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