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Negative interest rates: Bank of England policymaker defends plan

Added 09-27-20 07:04:05am EST - “Silvana Tenreyro said evidence from countries that have introduced the policy was "encouraging".” - News.yahoo.com

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Posted By TheNewsCommenter: From News.yahoo.com: “Negative interest rates: Bank of England policymaker defends plan”. Below is an excerpt from the article.

A Bank of England (BoE) policymaker has defended the potential use of negative interest rates, which could take the cost of borrowing below zero.

On Tuesday, the BoE governor played down the prospect of taking rates below zero, insisting it just needed to make sure it could do so if needed.

If interest rates are negative, the BoE charges for any deposits it holds on behalf of the banks. That encourages banks to lend the money to business rather than deposit it.

In an interview with the newspaper, Ms Tenreyro - an external member of the Bank's Monetary Policy Committee - said that evidence from other European countries and Japan suggested that negative interest rates had succeeded in cutting firms' borrowing costs and that banks would cope with the extra pressure on their finances, despite coronavirus.

Described as the "single most important interest rate in the UK", the base rate determines how much interest the Bank of England pays to financial institutions that hold money with it, and what it charges them to borrow.

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