Negative interest rates have been a source of discussion recently, as the financial crisis continues throughout the UK. Back in March, the Bank of England took the decision to lower its base rate to a record low of 0.1 percent, causing many popular providers to follow suit. As financial difficulties continue, there has been speculation about whether negative interest rates could be deployed in the country for the first time.
And of course, many are worried about the potential impact this could have on their money.
However, the prospect of negative interest rates could be close by, with one Bank of England official floating the idea as a positive.
Jonathan Haskel, an external member of the Monetary Policy Committee (MPC) has said there is “positive evidence” negative interest could be a remedy to the economy.
Speaking to an online audience at the Barclays Global Inflation conference, Mr Haskel discussed the idea of negative rates.
Silvana Tenreyro, another external member of the MPC, told the Sunday Telegraph there had been “encouraging” evidence the measure could work.
She added: “We have been discussing our toolkit in recent months, including how effective negative rates might be in the current context.”
There is, though, clearly divided opinion on the matter.
The chief economist of the Bank of England, Andy Haldane, recently said the conditions for introducing such a measure had not yet been met.
And Andrew Bailey, governor of the Bank of England, appeared to back peddle on the idea there was a move to negative interest rates.
While the governor did maintain the idea that negative rates are “in the toolbox” he also stated people should not expect them to be used imminently.
Negative interest rates have not been deployed in the UK before.
However, it is likely the impact on savers will be one which is palpably felt.
Negative rates could penalise Britons for keeping savings in their bank account.
One option could mean savers are ultimately charged to hold money within their bank accounts – a serious consequence of the COVID-19 crisis.
The policy could, however, benefit those who borrow, as this is what the bank may be looking to encourage through negative rates.
The policy has been deployed in other countries across the world, including Sweden, Japan and Switzerland – in varying ways.
But Mr Bailey has said the use of the negative rates globally has had “mixed” results.