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- BoE's MPC member Saunders: Negative rates review is still ongoing
BoE's MPC member Saunders: Negative rates review is still ongoing
- There is only a small number of cases of negative rates elsewhere to draw on, and experience elsewhere may not provide a perfect guide for UK
- Experience of other countries with negative rates is that a rate cut below zero lifts growth much in the same away as a rate cut above zero
- Other studies suggest the net effect of negative rates on bank profitability is small and may even be slightly positive
- Effectiveness of any single policy tool may be less than usual or more uncertain than usual
- The most effective means may be to use a range of policy tools
- There are some headwinds that could leave the economy stuck with persistently high unemployment and below-target inflation
- It those downside risks develop, risk management considerations argue for relatively prompt monetary policy response, in my view
- If more stimulus is needed, rate cut and QE may be the best approach
- Better to provide too much monetary stimulus unless inflation expectations are contained
- It also is possible that the economy will recover faster than expected
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