BoE’s Saunders says negative rates may be best tool

Bank of England policymaker Michael Saunders said cutting interest rates below zero could well prove the best tool for the central bank under some future circumstances, but the BoE did not need to decide on this yet.

Saunders said in December that negative interest rates could be a useful tool, and on Thursday he said interest rates below their current 0.1% would be the most effective way to lower the yield curve in financial markets, which drives borrowing costs.

This month the BoE gave banks six months to prepare for a possible decision to cut rates below zero.

“As to whether it’s desirable, whether it’s appropriate to achieve our remit to stabilise inflation, that would be a judgement to take at the time. It is not one we need to make yet,” Saunders said at an event hosted by the Resolution Foundation think tank.