UK set to see more extreme monetary policy
The Bank of England looks likely to cut interest rates below zero at the end of this year.
The UK is heading for negative interest rates, say Morgan Stanley analysts Jacob Nell and Bruna Skarica. Economic weakness is likely to prompt the Bank of England to slash rates below zero at the end of this year. While the top priority now is propping up the Treasury’s splurge through quantitative easing, the focus will shift to interest rates once government furlough schemes end in the autumn. It wouldn’t be a temporary measure either: the experience of other countries shows that negative interest rates can “persist for years”.
Talk of a world in which savers pay for someone else to take their money moves us into “Alice in Wonderland territory”, as Ruth Sunderland points out in the Daily Mail. In practice, negative interest rates are unlikely to mean interest income for mortgage borrowers and deductions on balances in savings accounts. But they make for a more brittle banking system and stoke wealth inequality by making it harder for the poor to grow their cash savings and adding yet more liquidity to asset markets.
“Ultra-extreme monetary policy” has wrought enough damage as it is, agrees Liam Halligan in The Daily Telegraph. How else to explain the absurdity of a stockmarket rally during the worst UK economic decline in 300 years? Launched in 2009 as a “£50bn, one-off emergency response”, the Bank of England’s QE programme is today worth £645bn. Loose monetary policy is “way past the point of doing any good”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex Rankine is Moneyweek's markets editor
-
How to invest in nuclear power
We need nuclear power to go green, says Dominic Frisby. But there is a better option than huge power stations
By Dominic Frisby Published
-
Chase slashes its easy-access savings rate – is it time to switch?
The Chase easy-access savings account has proved popular with savers thanks to its competitive rate and bonus deals. But, as the rate has dropped, has it lost its charm?
By Katie Williams Published
-
UK wages grow at a record pace
The latest UK wages data will add pressure on the BoE to push interest rates even higher.
By Nicole García Mérida Published
-
Trapped in a time of zombie government
It’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
By Max King Published
-
America is in deep denial over debt
The downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
By Alex Rankine Published
-
UK economy avoids stagnation with surprise growth
Gross domestic product increased by 0.2% in the second quarter and by 0.5% in June
By Pedro Gonçalves Published
-
Bank of England raises interest rates to 5.25%
The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
By Ruth Emery Published
-
UK wage growth hits a record high
Stubborn inflation fuels wage growth, hitting a 20-year record high. But unemployment jumps
By Vaishali Varu Published
-
UK inflation remains at 8.7% ‒ what it means for your money
Inflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
By John Fitzsimons Published
-
VICE bankruptcy: how did it happen?
Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
By Jane Lewis Published