LONDON (Reuters) – Bank of England Governor Andrew Bailey said negative rates were part of the central bank’s stimulus options but they were not about to be used to steer Britain’s economy through the coronavirus crisis.
“They are part of our toolbox,” Bailey told reporters after the BoE published its latest outlook on the economy. “But at the moment we do not have a plan to use them.”
Bailey also said the central bank’s projection that unemployment would hit 7.5% – almost double its current rate – was a “very bad story” but it was expected to fall back over time and inflation was likely to rise back to the BoE’s target.
“So you can draw a conclusion from that about where policy is headed,” he said.
However, Bailey warned that the British economy faced big challenges ahead and the BoE was ready to provide more stimulus if needed.
“There are some very hard yards, to borrow a rugby phrase, to come. And frankly, we are ready to act, should that be needed.”
He also said the possibility of Britain failing to strike a trade deal with the European Union by end of this year was part of the downside risks that the BoE saw for the economy, but the COVID-19 pandemic was the biggest challenge.
Earlier on Thursday, the BoE kept its benchmark interest rate at 0.1% and also left unchanged the size of its bond-buying programme at 745 billion pounds. ($980 billion)
(Reporting by William Schomberg, editing by Andy Bruce; Editing by Andy Bruce)