Bank of England says no negative interests rate in the near future

The Bank of England today announced it will not implement a policy of negative interest rates. 

Instead, following a vote by the Monetary Policy Committee, the central bank held interest rates at 0.1%. 

The Bank of England’s confidence in the UK economy caused the pound to strengthen against the dollar. GBP/USD was trading firmly above 1.3650 levels. 

The decision by the Bank of England, as outlined by a statement on its website, was based on a positive outlook for the UK economy. 

“Covid-19 (Covid) vaccination programmes are under way in a number of countries, including the United Kingdom, which has improved the economic outlook,” the statement read.  

The central bank had been considering implementing negative interest rates in recent months, consulting with UK banks and building societies. 

However, today’s report confirmed, while there is no prospect of imminent negative rates, there is a possibility in the future.

“While the Committee was clear that it did not wish to send any signal that it intended to set a negative Bank Rate at some point in the future, on balance, it concluded overall that it would be appropriate to start the preparations to provide the capability to do so if necessary in the future,” the Bank of England report stated. 

Analysts echoed the central bank’s sentiments around the possibility of a strong economic recovery.

“The pace at which the vaccine rollout has progressed has been incredibly encouraging and will provide much needed hope for people and businesses alike,” said Ian Wawrick, managing partner at Deepbridge Capital. 

While Warwick was optimistic about the vaccine rollout, he asserted the need for support for UK companies. 

“Agile companies, which have survived 2020 and provide a product or service which has a genuine medium to long term solution to a recognised problem, will continue to develop and grow but require capital to do so,” Warwick said.