Negative rates ‘won’t help economy’

NEGATIVE interest rates won’t boost the economy, Nationwide boss Joe Garner believes.

The building society executive says another rate cut by the Bank of England later this year – as has been speculated – would ‘raise big questions’ about how people are supposed to save for retirement.

The base rate is currently 0.1 per cent, having been cut repeatedly since the early days of the financial crisis in 2007. ‘We’ve never had a society that has lived with interest rates at around zero for so long,’ Garner says. ‘How do you save for your retirement in a world of zero-everything?’

Garner adds: ‘ I’m trying to understand the argument [ for negative rates] better.

‘The argument seems to be that negative interest rates make people spend money rather than save it. But the issue is that people can’t spend their money because of Covid, it’s not because of rates.’

He says: ‘And the reason businesses are not making investment decisions is uncertainty about the future.

‘There are a lot more savers than borrowers in this country, so we really do need to understand the long- term impact of this super- low base rate environment.’