LONDON (Reuters) - Bank of England Deputy Governor Ben Broadbent said the central bank would have to weigh up the pros and cons of cutting interest rates below zero to help Britain’s economy cope with the coronavirus shutdown.
“We keep under review all our potential policy tools and this is a question that’s been thought about on and off since the financial crisis and it’s a balanced judgment,” Broadbent told CNBC television on Tuesday.
He said it was “quite possible that more monetary easing will be needed over time”, as signalled by the BoE last week.
But while cutting rates further could stimulate demand, they could also have negative side effects for banks whose lending is vital for the economy.
“These are the balanced questions the committee has to think about and ... has been thinking about for the past decade,” Broadbent said.
The BoE cut its benchmark lending rate to an all-time low of 0.1% in March, raising questions about whether it would have to rethink its long-standing reluctance to take it below zero.
Most economists expect the BoE to use its other main policy tool - buying hundreds of billions of pounds’ worth of bonds, mostly government debt - to provide more stimulus to the economy, possibly by increasing the programme in June.
Broadbent told CNBC the BoE would not be pressured to cut rates below zero if other central banks went in that direction.
Last week, financial markets for the first time ever priced a small chance of negative U.S. interest rates next year, prompting Chicago Fed President Charles Evans to say he did not think zero rates would happen in the United States.
Writing by William Schomberg; Editing by Alison Williams and Giles Elgood