The Bank of England’s deputy governor Paul Tucker says the monetary policy committee has discussed the idea of negative interest rates.
Tucker told MPs at a Treasury select committee hearing today that he has raised the idea in the past but that it is an “extraordinary thing to do” and requires careful consideration after he was asked about the range of possible monetary instruments the monetary policy committee has reviewed.
He said: “I hope we will continue to think about whether there are constraints to setting negative interest rates. This is an idea that I have raised. This would be an extraordinary thing to do and it needs to be thought through very carefully.”
He added that it was “not something anyone should clutch on to as the answer to the universe”.
The base rate has remained at 0.5 per cent since March 2009. Tucker also touched on the possibility of bringing the rate down to zero, noting the potential risk this presents of making things harder for building societies and small lenders.
The members of the MPC unanimously voted to keep the rate at its current level earlier this month, while Mervyn King, Paul Fisher and David Miles all voted in favour of increasing the QE programme to £400bn from £375bn.