9 Oct

Reducing the base rate "would be very bizarre"

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.

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