July 5, 2020 / 2:44 AM / a month ago

BoE Governor warns lenders of challenges of negative interest rates - Sunday Times

FILE PHOTO: Bank of England Governor Andrew Bailey poses for a photograph on the first day of his new role at the Central Bank in London, Britain March 16, 2020. Tolga Akmen/Pool via REUTERS

(Reuters) - Bank of England (BoE) Governor Andrew Bailey has written a letter to lenders warning them of the challenges of negative interest rates, the Sunday Times newspaper reported.

The letter said that negative rates were "one of the potential tools under active review" if the monetary policy committee decided that "more stimulus" was needed to hit the BoE's 2% inflation target, the newspaper reported bit.ly/38tyTq7. It didn't disclose how it gained knowledge of the letter's content.

The report said Bailey held a meeting with heads of banks at the end of June and that negative rates were discussed in that meeting in which the governor said “every tool they have is on the table”.

On negative interest rates, Bailey has previously said that they were an option for the BoE, but that the issue was complex and taking borrowing costs below zero was not in any way imminent.

Reporting by Kanishka Singh in Bengaluru; Editing by Kenneth Maxwell

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