BoE's Haldane says negative rates not remotely close

The Bank of England's chief economist has said the central bank is not remotely close to a decision on adopting negative interest rates in the latest tweak to the BoE's guidance on the subject.

Andy Haldane said the BoE would have to consider mattters such as the impact on the financial sector and confidence in the economy before cutting the benchmark rate below zero from 0.1%.

“Those are the aspects that we’ll look at,” Haldane said during an webinar organised by the Confederation of British Industry.

“To be clear, reviewing and doing are different things and currently we are in the review phase and have not reached a view remotely yet on the doing,” he said, according to Reuters.

Analysts have been examining BoE officials' statements for guidance on whether its monetary policy committee is prepared to take the unprecedented step of negative rates to support businesses and households during the Covid-19 crisis. Haldane appeared to open the door to negative rates when he said on 17 May that the MPC was looking at the idea "with greater immediacy".

Haldane also said the UK economy probably shrank by more than 20% in the second quarter but that data was coming in a touch better than the BoE's scenario.

BoE Governor Andrew Bailey's statements have warmed slightly to the idea of negative rates but he has said the move could be bad for banks because it makes lending less profitable. He has also said a thorough communications plan would be needed.