A Bank of England (BOE) policymaker has said that an investigation into whether negative rates might help the UK economy through its current downturn found “encouraging” evidence from other countries.
Silvana Tenreyro, defended the potential use of negative interest rates, which could take the cost of borrowing below zero, in an interview with the Sunday Telegraph.
“There has been almost full pass-through of negative rates into lending rates in most countries,” she said.
Tenreyo, who is an external member of the Bank’s Monetary Policy Committee, said that banks would be able to handle further pressure on their finances.
“Banks adapted well – their profitability increased with negative rates, largely because impairments and loss provisions decreased with the boost to activity and the increase in asset prices.”