- Bank of England Asks Banks on Readiness for Negative Rates
by DANICA KIRKA, LONDON (AP) — The Bank of England has asked commercial banks whether they are ready for negative interest rates, signaling that the central bank is moving closer to cutting its key interest rate below zero.
If the benchmark rate were cut to less than zero, from the current 0.1%, commercial banks would have to pay the Bank of England to hold deposits for them. Policy makers have previously indicated that they were willing to consider negative interest rates amid the economic pressures caused by the COVID-19 pandemic.
A negative interest rate would encourage banks to lend money out rather than leave it at the Bank of England. A negative interest rate could theoretically result in savers being charged to hold deposits in their bank accounts, but commercial considerations, such as the need to attract deposits, might prevent banks from passing on all their costs to customers.