MNI POLICY: Implementing Negative Rates Complex-BOE Cunliffe

--Sees Challenges Moving To Negative Interest Rates

--Has Long Warned Financial Sector To Prepare For No Deal Brexit

By David Robinson

     LONDON (MNI) - Taking Bank Rate into negative territory would likely be a

drawn out and complex procedure, rather than something the Bank of England's

Monetary Policy Committee could adopt swiftly, Deputy Governor Jon Cunliffe said

Tuesday.

     In a question and answer session following his speech to the Investment

Association, Cunliffe said that while a negative Bank Rate was a policy tool

that the Monetary Policy Committee could use, the Bank would want to complete

analytical work before proceeding with the complex operational work that would

be required to implement it.

     --With Bank Rate at 0.1% Cunliffe, asked about the possibility of taking it

below zero, said that not only would it require an extensive communication

campaign so that people understood, it would also require a lot of preparatory

work for the Bank and financial sector.

     He said that the Bank would need to asses the impact of negative rates on

financial sector firms, saying "we are depending on the financial system to

support the economy and not to deleverage."

     --Asked about the risk of the UK leaving the EU with no trade deal at the

start of next year Cunliffe said that the Bank has long warned the financial

sector to prepare for this eventuality.

     "We have been telling the financial sector to prepare for the worst for two

and a half years now," he said, adding that firms had take steps to ease the

hit, including relocating some parts of their businesses into the EU.

     --Cunliffe said that recent data had not undermined the Bank's scenario

that the Covid shock would result "in a very sharp hit in Q2 and gradual

recovery."

     The Bank expects some element of voluntary social distancing lasting well

into next year and its scenario showed that the economy would only recover its

pre-crisis level in the middle of next year.

     Cunliffe added that the latest survey evidence suggests "some recovery over

April and May and that people have responded to news about when restrictions

might be lifted."

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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