Mark Carney discusses the possibility of an interest rate cut to the Treasury Select Committee

by Neil Patterson

16:33 PM, 23rd February 2016
About 3 years ago

Mark Carney discusses the possibility of an interest rate cut to the Treasury Select Committee

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Mark Carney discusses the possibility of an interest rate cut to the Treasury Select Committee

Mark Carney, Governor of the Bank of England, was today speaking at a Treasury Select Committee hearing. He indicated that interest rates were more than likely not to rise in the medium term and that if the economy needed further stimulation the Bank could consider a further drop in rates towards zero, but ruled out a negative rate.mark carney

Mr Carney said, “we are not on a preset course and of course if risks were to materialise and the global situation were to intensify to the downside, that would have implications for the path of policy.”

On future rates and levels of quantitative easing he added “We could cut interest rates towards zero. We could engage in additional asset purchases, including a variety of assets. We could also provide a perspective where we could adjust our policy horizon. We could shorten our policy horizon over which we wanted to return inflation to target.”

On ruling out negative interest rates Mr Carney said, “We have no intention, no interest in negative interest rates. We have other options and would take very seriously the impact of negative interest rates on financial services and building societies especially.”

Although a drop in interest rates may be advantageous to some borrowers the negative implications for the UK’s economic outlook would far outweigh any benefit.



Comments

Barry Fitzpatrick

9:26 AM, 24th February 2016
About 3 years ago

A very long winded way of saying "I haven't a f*****g clue"

Neil Patterson

9:29 AM, 24th February 2016
About 3 years ago

Yes Barry and that is the concern

Mark Crampton Smith

9:31 AM, 24th February 2016
About 3 years ago

"Fiddling while Rome burns" springs to mind?

Neil Patterson

9:38 AM, 24th February 2016
About 3 years ago

Unfortunately without the massive debt the Treasury could have used looser Fiscal policy, but the Bank of England can only play with the cards dealt to them by government.

Dr Rosalind Beck

9:43 AM, 24th February 2016
About 3 years ago

Reply to the comment left by "Neil Patterson" at "24/02/2016 - 09:38":

Very interesting news, Neil. Well done for being on the ball as usual!

Personally (selfishly and undoubtedly simplistically) I love the idea of negative interest rates - I'd just love the mortgage lenders paying me each month - imagine what that would do to Clause 24? Would the Government have to also pay us instead of charging us tax on interest? The mind boggles. I'll have to go and lie down as it's 'urting me brain.'

Neil Patterson

9:54 AM, 24th February 2016
About 3 years ago

Hi Ros,

Thank you 🙂

In practice negative interest rates generally only affect the Banks as in the EU where they are charged for holding deposits with the Central European bank in an effort to encourage them to lend rather than sit on the money. Currently this rate is -0.3% but the retail rate is 0% so customer still pay to borrow.

I hope that helps a little.

michael fickling

10:09 AM, 24th February 2016
About 3 years ago

Be careful what you wish for guys. Remember west mids building societys action in renaging on B of E discounted mortgages.??..for their own economic reasons . note:. their own.... and winning the subsequent court case.!!
Also history tells us a government will step in when big financial institutions are threatened economically. They would perhaps support lenders in "remaining financially viable "....including perhaps allowing lenders to take similar actions to the west brom...and by that means or some other survive ....because with a big lender being threatened by losing millions on zero or negative rates it could lead to a run on that bank / lender.....No westernised government can or will allow that to develop. As landlords..... stability is good for us ...and low rates are very nice...zero or negative rates however might not be..indeed it could lead to a toxic economic scenario in which we might suffer in various ways.

Neil Patterson

10:13 AM, 24th February 2016
About 3 years ago

Reply to the comment left by "michael fickling" at "24/02/2016 - 10:09":

Yes I agree those are risks if things get that bad.

West Brom haven't got away with it yet though as the appeal court dates are 27-28th April.


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