Bank of England official defends negative rates as recovery is ‘halted’

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A new CBI survey has shown that more than three-quarters of companies want a deal to be done, with almost half of respondents saying the impact of Covid-19 treatment has hampered Brexit preparations.

Rob Wood, UK chief economist at the Bank of America, said: “I expect the Bank of England to cut rates to zero, not negative, because negative rates have a negative impact at best. marginal stimulus effect, but it’s the only ammunition left in the bank’s closet – not that negative rates have become a better policy tool since March.

“The question then is whether the current restrictions on Covid-19 are sufficient to slow the spread. This will have a significant effect on the prospects for growth and employment. “

Kallum Pickering, Senior Economist at Berenberg Bank, said: “The obvious risk is if you get a messy and brutal exit from the Single Market. This would increase the risk of negative interest rates. “

Instead, Mr Pickering predicted an additional £ 100bn of QE in November, adding: ‘There is more merit in controlling the yield curve in the UK than in interest rates. negative. “

He added that the Chancellor’s announcements would barely cushion the jobs crisis expected in the fall.

“At the margin, this could mean that unemployment is a bit lower in the fourth quarter of this year than it would have been otherwise – the peak in November will be a bit lower,” he said.

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