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Pound falls after King visits negative rate Swedish bank

The pound dropped yesterday after the Bank of England confirmed that governor Mervyn King had met Swedish officials who have recently set negative bank rates, according to the Daily Telegraph.

Sterling dropped against the Yen, Dollar and Euro yesterday afternoon after it was revealed that King visited Riksbank officials late last week, after a talk to the Royal Swedish Academy of Engineering Science.

In July, the Swedish Riksbank set negative interest rates on its central reserves in an attempt to force money into the real economy.

Critics of the £175bn quantitative easing package have argued that the money is not finding its way into the real economy and is instead being hoarded by financial institutions in the Bank of England’s central reserve.

At last month’s inflation report press conference, King admitted that a change in Bank rate is something that could be considered. He said: “It is certainly true that it would be useful to think about ways to encourage banks individually to try to convert some of their reserves which would then reinforce the transmission mechanism of the direct assets purchases that we make.”

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