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The Office for National Statistics (ONS) stated October’s borrowing reached £22.3bn - £10.8bn more than over the same time period last year. While borrowing in October was lower than economic forecasts and £12.1bn less than during the previous month, it still marks the highest October borrowing since records began and 6th highest monthly total overall.
The deputy governor of the Bank of England, has written to firms asking about their 'operational readiness' for a zero or negative Bank Rate. The Bank is asking firms to provide information on what operational preparations they would need to make in the event that the Bank’s Monetary Policy Committee considers a zero or negative policy rate. The deadline for responses is Thursday 12 November 2020. In August, the Bank of England’s Monetary Policy Committee (MPC) noted that it would continue to assess the appropriateness of a negative official Bank Rate alongside all of its other tools.
At it's meeting on the 4th of August, the Committee said that the outlook for the UK and global economies "remains unusually uncertain". The MPC said the economic outlook and the future path for monetary policy will depend "critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these factors". The Committee says it "does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably".
With the past decade have driven the base rate to just above zero, and now the Bank is debating whether to follow the example of the eurozone, Japan and several other countries in setting a negative interest rate.
A new report from PwC has outlined how banks and lenders should prepare for the possible introduction of negative interest rates. In the report, PwC says that "noises from the Bank of England suggest the chances of it dropping its base rate below zero have gone from “don’t count on it” to “anything’s possible” and for banks, that’s a big deal.”
