Negative interest rates mean more pain for savers

This suggestion by Paul Tucker, Deputy Governor of the Bank of England, may sound shocking, but it's a technical device, albeit an unusual one

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So 0.5 per cent is not low enough? What about zero interest? And if that is not low enough, let’s have negative rates, where you actually lose money if you put it in the bank?

If this suggestion by Paul Tucker, Deputy Governor of the Bank of England, made to the Treasury committee yesterday sounds shocking, you can relax a little.

There is no plan for individuals to lose money by putting it in the bank – being paid the present derisory rates when inflation has been up to 4 per cent a year is insult enough. The idea is that banks might have to pay to deposit money with the Bank of England, a device that has been used by other central banks, notably the Swedish central bank, the Riksbank, in 2009 when it was trying to discourage hot money inflows.

So it is a technical device, albeit an unusual one. But the effect would be to push other rates down, thereby hurting savers even more. It may never happen.

But those of us who worry that we are governed by an elite that does not care about the interests of ordinary people – who want to save for their future – have even more reason to fear.

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