MNI BRIEF: BOE Tenreyro Evidence Encouraging On Negative Rates

There are good signs that negative interest rates could be a key tool for the Bank of England in its battle to recover from the economic impact of the Covid-19 pandemic, Monetary Policy Committee member Silvana Tenreyro said in an interview with the Telegraph published Sunday.

"We have been discussing our toolkit in recent months, including how effective negative rates might be in the current context. The evidence has been encouraging," she said.

"There has been almost full pass-through of negative rates into lending rates in most countries (that have adopted negative rates). 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, she added"

Tenreyro was less upbeat on the recovery than some MPC members, seeing an "interrupted, incomplete V" recovery. Her views chime more with fellow Committee member Michael Saunders, who earlier this month said additional easing may be required at some point.