Negative interest rates ‘not seen as an option’, Carney says

Bank of England (BoE) governor Mark Carney has claimed the central bank will not pursue negative interest rates, a monetary policy method previously adopted by the European Central Bank (ECB) and Bank of Japan.

Speaking to Central Banking magazine earlier this month, in an interview published yesterday, Carney said: “At this stage, we do not see negative rates as an option here. I am not criticising others that have used them, but we don’t see it as an option.”

Negative interest rates look to encourage banks to spend their excess cash by penalising them for opting to keep it in their country’s central bank, although Carney claimed this practice can be “counter-productive”.

The UK’s central bank has chosen to maintain its base rate – which determines the cost of lending to the economy – at 0.75 per cent, highlighting that low unemployment rats and inflation close to its target of 2 per cent.

In the interview, Carney added that the BoE’s view “is that the effective lower bound is close to zero, but positive – just above zero.”

Furthermore, the governor also expressed that he thought changing the bank’s inflation target of 2 per cent would be a bad idea.

During the interview, Carney also urged France and Germany to take action to ensure that uncleared derivate contracts can function smoothly post-Brexit.

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