Andrew Bailey, Governor of the Bank of England, said this morning that the bank is not close to implementing negative rates despite the resurgence of the coronavirus in the UK reinforcing downside risks to the UK economy.
In the wake of these comments, the British pound trimmed its losses, rising to today's highs at 1.2845. The Bank of England held a meeting last week, and the meeting minutes showed that policymakers are planning constructive talks with banks about the viability of sub-zero interest rates – prompting some over-excited speculation about how radical the Bank’s plans could be.
Boris Johnson, Britain's Prime Minister, is preparing to announce a new batch of measures later today after his government once again urged people to work from home if possible.
Britain will face many economic dilemmas during the next few months, in light of the restrictions that may have be imposed due to the virus, a likely possible rise in unemployment if the furlough scheme ends as planned in October programs, and the increasingly likely possibility of a messy Brexit.
The Bank is expected to expand its plan to buy bonds at the November meeting.
On the other hand, Bailey stressed that any shift to a tighter monetary policy will require strong indications of recovery.
