Bank of England governor Mark Carney has quashed speculation the bank will move to negative interest rates in the future saying it has other options to provide economic stimulus.
Earlier today, the Bank cut its base rate to 0.25 per cent from 0.5 per cent, as well as announcing a £10bn corporate bond buying package and increasing its quantitative easing programme to £435bn.
Announcing the policy moves, the Bank of England said the majority of Monetary Policy Committee members expect interest rates to be cut further during the year to “close to, but a little above zero”.
At the press conference following the announcement, Carney was repeatedly asked if interest rates could drop below zero.
He said: “I am not a fan of negative interest rates. We have other options to provide stimulus
“We are not intending to move to negative interest rates. One would not want to see deposit rates go below zero.”
Carney did not rule out further interest rate cuts, saying all aspects of the package announced today could be increased.
The governor delivered a clear message to banks not to withhold the rate cut from borrowers.
He said: “The banks have no excuse with today’s announcement not to pass on this rate and they should write to their customers.”
Carney dismissed suggestions the stimulus measures could be seen as an overreaction, calling the package an “appropriate response” to the economic conditions.
He said: “There is a clear case for stimulus – and stimulus now – in order to be there when the economy really needs it. This is about cushioning the shock and ultimately making this a success.”