- Advertisement -
Home Money Bank of England base rate likely to stay at 0.1% but there...

Bank of England base rate likely to stay at 0.1% but there could be £100bn more stimulus

- Advertisement -

The Bank of England could launch a further stimulus package worth as much as £100billion before it cuts rates to below zero, economists are forecasting.

Economists say interest rates are likely to remain at 0.1 per cent when the Bank meets this week.

But data firm Bloomberg said the money markets are already beginning to price in a cut to negative in the second quarter next year. And one expert has even raised the possibility of the Bank at some point introducing restrictions on the use of cash.

Stimulus: The Bank of England could launch a further stimulus package worth as much as £100billion this week

Stimulus: The Bank of England could launch a further stimulus package worth as much as £100billion this week

A move to negative interest rates – the first time ever in Britain – would mean commercial banks being charged to lodge their money with the Bank, and those charges, in turn, would be passed on to their customers.

The hope would be that this would encourage banks to lend and prompt firms and households to spend rather than save, thus giving a lift to the economy. Bank governor Andrew Bailey is expected to publish a report this week into the prospect of negative rates after warning in June they were a possibility.

Since the onset of the crisis, the Bank has beefed up its programme of money creation, or ‘quantitative easing’ (QE), taking the total from £445billion to £745billion.

Howard Archer – chief economic adviser to the Item Club, which uses the Treasury’s computer model of the economy – said he expected more QE later in the year.

Douglas McWilliams – deputy chairman of the independent Centre for Economics and Business Research – said that with soaring levels of business failures and job losses expected between now and the middle of next year, we may well require a mixture of QE and negative rates just to keep the economy afloat.

But he warned that, without controls on the use of physical money, negative rates would simply see cash stored ‘under the mattress’. He added: ‘It will be interesting this week to see if the Bank suggests restrictions on cash usage.’

Bank governor Andrew Bailey is expected to publish a report this week into the prospect of negative rates

Bank governor Andrew Bailey is expected to publish a report this week into the prospect of negative rates

Such restrictions could range from a ban on cash, thought to be unlikely, through limiting ATM withdrawals, requiring all self-employed people to register for VAT, reducing higher denomination banknotes and encouraging the larger retail chains to phase out the acceptance of cash for anything other than small items.

Chris Williamson, chief business economist at IHS Markit, said: ‘I don’t think negative rates are imminent. But the Bank will need to produce more stimulus from somewhere. It will have to face the reality the recovery from earlier in the year is losing momentum.’

- Advertisement -
- Advertisement -

Stay Connected

16,985FansLike
2,458FollowersFollow
61,453SubscribersSubscribe

Must Read

Stop going on about my gold shoes and bright clothes, says the Tate’s first female boss

Maria Balshaw, the first female director of the Tate, today hits out at the sexism...
- Advertisement -

West Ham ‘may be forced to sell £70m Chelsea target Declan Rice’ as David Moyes eyes new signings

West Ham's summer business could hinge on the future of Declan Rice, who the Hammers may be forced to sell in order to fund...

The Masked Singer’s Jackie O reveals show’s safety convinced her to go to COVID-stricken Melbourne

Jackie 'O' Henderson has admitted that she would not have travelled to Melbourne to film for The Masked Singer if production would not have...

After Trump’s gaffe it emerges that Yosemite Sam is Jewish and named Samuel Rosenbaum 

President Trump's verbal gaffe - in which he mispronounced Yosemite as 'Yo-semites' - is reminding people that famed cartoon character Yosemite Sam is actually...

Related News

Stop going on about my gold shoes and bright clothes, says the Tate’s first female boss

Maria Balshaw, the first female director of the Tate, today hits out at the sexism...

West Ham ‘may be forced to sell £70m Chelsea target Declan Rice’ as David Moyes eyes new signings

West Ham's summer business could hinge on the future of Declan Rice, who the Hammers may be forced to sell in order to fund...

The Masked Singer’s Jackie O reveals show’s safety convinced her to go to COVID-stricken Melbourne

Jackie 'O' Henderson has admitted that she would not have travelled to Melbourne to film for The Masked Singer if production would not have...

After Trump’s gaffe it emerges that Yosemite Sam is Jewish and named Samuel Rosenbaum 

President Trump's verbal gaffe - in which he mispronounced Yosemite as 'Yo-semites' - is reminding people that famed cartoon character Yosemite Sam is actually...

In a crowded field, Jimi Hendrix was rock’s number one Lothario, says a major new biography

As a young boy, Jimi Hendrix had a recurring dream. Always in dazzling colours, it included a mysterious, repeated set of numbers: a one,...
- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here