BoE’s Tenreyro: Possible that more stimulus will be needed

Bank of England (BoE) policymaker Silvana Tenreyro said on Monday that it’s possible more stimulus, at an appropriate pace, will be needed, as reported by Reuters.

Additional takeaways

“BoE work on the feasibility of negative rates still in progress, I have nothing new to add to this.”

“If that is the case, having negative rates in our toolbox will, in my view, be important.”

“My decisions on the amount of policy stimulus needed and the right tool to deliver it will depend on the outlook at the time of voting.”

“All else equal, looser monetary policy can help the economy recover faster, bringing inflation back to target.”

“The financial-market channels of monetary policy transmission have worked effectively under negative rates in other countries.”

“Experiences of negative rates in other countries suggests that bank-lending channels of monetary policy transmission have also been effective at boosting lending and activity.”

“We have a very large degree of spare capacity, there is no short term trade-off between our objectives.”

“Little evidence to suggest that many aspects of policy would operate differently from usual.”

“It is possible that the current structure of the UK banking system could lead to a less positive impact on bank profitability.”

“Resurgence in the virus likely to mean significantly more job losses still to come.”

“No clear evidence that negative rates have reduced bank profits overall, and a number of studies find positive impacts, once you take into account the boost to the economy.”

“Negative bank rate does not, therefore, imply that rates facing households and businesses will necessarily turn negative.”

“Speed of any future rebound likely limited by slow release of savings built up over lockdown.”

“For Q4 2020 and Q1 2021, we will see headline-grabbing negative numbers, big positive ones when the economy can reopen.”

“Quantitative easing is important in the event of market dysfunction, for example, but also that its power mainly lies in helping offset the disruption, rather than providing net additional stimulus to the economy.”

Market reaction

The GBP/USD pair edged slightly higher from daily lows after these comments and was last seen losing 0.6% on the day at 1.3480.