By Laurie Laird
LONDON (MaceNews) – One of the more dovish Bank of England rate setters has adopted more cautious view toward sub-zero interest rates in the UK, stressing that the development of a Covid vaccine could herald a more-rapid-than-expected return to normal financing conditions.
Silvana Tenreyro, an external member of the Bank’s Monetary Policy Committee, told the Reuters Investment Summit that she voted to expand quantitive easing at the November rate-setting meeting only “as a preventative measure.” Her comments echoed those of the Bank’s Chief Economist, Andy Haldane, who has been much more hawkish than Tenreyro since the onset of the Covid slowdown. “Everyone [on the Committee] has his or her vote, she added.
However, Tenreyro reiterated her belief that negative interest rates have been instrumental in preventing a more severe downturn in the eurozone, without unduly damaging the profitability of banks or businesses. In cases where banks did choose to pass negative deposit rates onto corporations, the measures “led to higher levels of investment,” she said.
Tenreyro’s comments came hours after fellow MPC dove Michael Saunders voiced support for lower UK rates, should the economy require further stimulus.
In a Bank of England webinar, Saunders also discussed the merits of a two-tier lending system, in line with measures introduced by the European Central Bank, in which corporate customers could borrow at rates well below the current UK base rate of 0.1%.
The MPC next meets to discuss policy on 17 December.
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Contact this reporter: laurie@macenews.com.
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