Bailey, BOE Governor, "No Plans to Apply Negative Interest Rates for Several Months"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Andrew Bailey, Governor of the Bank of England (BOE), stated on the 6th (local time) that there are no plans to apply negative interest rates for the next few months.

Governor Bailey made this remark after the Monetary Policy Committee (MPC) decided to keep the base interest rate at the current 0.1% during its regular meeting. The current base rate of 0.1% is the lowest level in the history of UK base rates.

In an interview with US economic broadcaster CNBC, he said, "Negative interest rates are indeed one of the tools we can use in principle, but we have no plans to deploy that tool at this time."

When asked if there is a possibility of applying negative interest rates next year rather than this year, he replied, "I cannot answer about monetary policy a year or more from now." While negative interest rates are not completely ruled out given the historically low base rate, he indicated that there are currently no plans to lower rates further.

The BOE also decided to maintain the asset purchase target at the previously announced ?745 billion. Before the COVID-19 crisis, the BOE held government bonds (?435 billion) and non-financial corporate bonds (?10 billion), but at a special meeting on March 19, it decided to expand by ?200 billion. Subsequently, at the regular meeting in June, it agreed to increase by an additional ?100 billion.

Meanwhile, the BOE forecasted that the GDP growth rate for the UK in the second quarter of this year would be about 20% lower compared to the fourth quarter of last year. Unemployment is expected to rise to 7.5% by the end of this year. However, the impact is anticipated to be somewhat less severe than the forecast made in May.

However, Governor Bailey indicated that it may take a long time for the UK economy to recover and that there are no plans to tighten monetary policy for the time being. He also stated that the recovery of the UK economy depends on the COVID-19 situation, measures to protect public health, and how the government, households, and businesses respond to these, emphasizing that the situation will be closely monitored and monetary policy adjusted accordingly.