9
Oct
Reducing the base rate "would be very bizarre"
Team Association customers might be intrigued to
read that reducing the base rate paid on commercial reserves would
be a "very bizarre thing" for the Bank of England to do, according
to one financial expert.
Geoffrey Wood, professor of economics at the Cass Business School,
said that such a move would not be practicable as the banks have
more reserves which they must store in the institution due to
quantitative easing.
His comments follow the announcement from the Swedish central bank
Riksbank that it is now charging minus 0.25 per cent for reserves
held there in order to help funds circulate around the country's
economy.
"Lowering the interest rate will have no effect on the banks
hoarding [reserves] [...] because at the moment, the Bank of
England is discerning the quantity," stated Mr Wood.
This news comes after Mervyn King, the governor of the Bank of
England, commented earlier this month that the establishment is
unlikely to reduce the rate of remuneration on a certain level of
reserves.
