With a second wave of the global pandemic looming on the horizon many economists are speculating that the Bank of England will have to make the unprecedented move of moving to negative interest rates. Meaning, in theory, that savers would have to pay to hold their money in their bank and that borrowers could earn interest for monies borrowed.
As well as this, Negative rates can weaken a country’s currency by making it a less attractive investment than other currencies. A weaker currency gives a competitive advantage when it comes to exporting goods and boosts inflation by pushing up import costs.
This is one of President Trump’s key motivations for wanting negative interest rates on the dollar.
But what do you think? Does this move make sense? one could argue quite compellingly it hasn’t made a huge difference for Japan or in parts of Europe but, then again, we need to do something, right?