BOE’s Bailey Promisses No Negative Rates
The new Bank of England governor Andrew Bailey was speaking earlier today on a press conference. He rejected the negative rates idea, which should be positive for the GBP, since it removes one bullet for the bears. But, the uncertainty regarding the coronavirus, Brexit and the next steps for the monetary policy are bearish in the longer term. Below are Bailys comments:
Comments by BOE Governor Bailey
- Negative rates are in the toolbox, but that is not the current plan
- Please don’t think we are about to use negative rates
- We are not taking a strong signal from the recovery so far for what happens next
- We could do more QE, new forms of forward guidance
- Risks are skewed to the downside
- Further stimulus would depend on downside risks coming to fruition
- Faster economic data gives only a partial picture of the economy
- Brexit deal failure is part of downside risks, but virus is the biggest issue for now
Bailey is making a firm plea to markets not to price in the possibility for negative rates just yet but his remarks on the economy sort of says otherwise. Despite a slightly positive tone from the rate statement earlier, Bailey is walking that back by saying they are not taking much from recent data and that risks are largely skewed to the downside. As such, the potential for negative rates is a strong case to consider.
On one side, Bailey is making it clear that they are not considering negative rates for now. On the other side, they are getting the market accustomed to talk about the issue as it is a likely possibility considering how the economic trajectory may play out.
This is becoming a bit of an odd habit but the BOE seems to just be opening up their press conferences for a select few people, before releasing the details later. Mind you, this means that there is no press conference later as it has already been conducted.
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