Bank of England not ruling out negative rates in future

Bank of England official Silvana Tenreyro talked up the benefits of negative interest rates, in comments likely to fuel expectations that Britain might one day take borrowing costs subzero to prop up the economy.

"The (Monetary Policy Committee) has not ruled out any policy tool," interest rate-setter Tenreyro told a London School of Economics webinar.

Central banks elsewhere in Europe and in Japan have tried negative interest rates with mixed results. The idea is to discourage banks from holding excess cash and to encourage lending, boosting business investment and consumer spending.

"My personal view, which comes from the reading of the European experiences, is that negative rates have had a positive effect in the sense of having a fairly powerful transmission to real activity," she said.

Tenreyro added that there would be specific considerations for Britain given its large financial sector.

BoE officials have previously expressed objections to taking rates below zero - as the central banks of the euro zone and Japan have done - because it might hinder the ability of banks in Britain to lend and hurt rather than help the economy.

But money markets ramped up expectations of negative interest rates after the BoE's chief economist said it was looking more urgently at options like negative rates and buying riskier assets as Britain slides into a deep coronavirusdriven slump.

British lawmakers on Tuesday heaped fresh pressure on the government for its handling of the coronavirus outbreak, calling its testing regime "inadequate" in the early stages.

Prime Minister Boris Johnson has been criticised for his initial response to the global pandemic, and has faced weeks of pressure about the availability of tests for the virus.

The country has seen 34,796 deaths, the secondhighest toll in the world behind the United States, and 246,406 cases, according to the latest figures.

But despite a recent surge in daily tests and the expansion of eligibility, MPs on a parliamentary committee said: "Testing capacity has been inadequate for most of the pandemic so far." "Capacity was not increased early enough or boldly enough. Capacity drove strategy, rather than strategy driving capacity," they said in a 19-page letter to Johnson.

The findings by the House of Commons science and technology committee come after six sessions of evidence involving scientists, public health experts and government advisers, which also looked at other countries' responses to the virus. On Sunday, Britain carried out 100,678 tests for coronavirus, but only 1,215 tests were performed on March 10, just two weeks before a nationwide lockdown was ordered and as cases spiked.

MPs said there was "consensus... that testing capacity has been too low". Reacting to the report, work and pensions minister Therese Coffey told the BBC: "The capacity is there." The government has come under sustained pressure about the spread of the virus in care homes, and the testing of frontline health and social care workers.

Official data published last week indicated that more than 12,500 deaths of care home residents were linked to the virus.

The committee said abandoning community testing on March 12 left care home residents and workers unable to get tests "at a time when the spread of the virus was at its most rampant".

The Guardian on Tuesday cited an unpublished government study that said temporary workers transmitted the virus between care homes.

Ministers have ously claimed to "thrown a protective around care homes". previhave ring