BoE policymaker Silvana Tenreyro said in a Sunday Telegraph interview that the evidence from negative interest rates in Eurozone and Japan “has been encouraging”. Negative rates had succeeded in lowering companies’ borrowing costs while maintaining bank’s profitability.
“There has been almost full pass-through of negative rates into lending rates in most countries,” she added. “Banks adapted well – their profitability increased with negative rates largely because impairments and loss provisions have decreased with the boost to activity and the increase in asset prices.”
The V-shaped recovery in the UK economy is threatened by resurgence of infections locally, and a weak global economy. “Flare-ups like we’re seeing may potentially lead to more localized lockdowns and will keep interrupting that V,” she said. “Another factor interrupting the V is a very weak global outlook, with high uncertainties, particularly with a second wave already striking many countries.”
