Negative UK interest rates were once unthinkable. But tough times lay ahead

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With the power of ultra-low rates and QE fading, the Bank of England is now considering going negative

Imagine the scene. It’s a year from now and Covid-19 hasn’t gone away. The economy is in the doldrums, with unemployment rising and inflation well below its 2% target. The Bank of England has been pumping money into the financial system through its quantitative easing (QE) programme but to little effect. What’s its next move?

One option for Threadneedle Street would be to say it was effectively out of options and pass responsibility for further stimulus over to the chancellor. After more than a decade of ultra-low interest rates and hundreds of billions worth of QE, there is a strong case for fiscal policy – tax cuts and public spending increases – doing the heavy lifting.

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