Bank of England (4)

One of the Bank of England's policymakers has described evidence surrounding negative interest rates as "encouraging", hinting that a move could be on the horizon.

As recently as last week, the Bank's governor, Andrew Bailey, had distanced himself from the idea, insisting that the central bank needed to make sure it could happen.

The Bank of England's main response to the Covid-19 pandemic has been to cut rates from 0.25% to 0.1%.

Cutting rates to below zero is designed to encourage people to spend more and save less, while encouraging banks to lend more money to businesses. It's a move that would result in people paying back less money than they borrowed on loans and mortgages.

Speaking to the Sunday Telegraph, Silvana Tenreyro, who is a member of the Bank of England's Monetary Policy Committee, said the evidence from other nations that had introduced negative interest rates was "encouraging".

Ms Tenreyro said that European countries and Japan had shown that negative rates had cut borrowing costs for businesses, while banks were capable of withstanding the added financial pressures. In fact, some banks had seen profitability increase.

"There has been almost full pass-through of negative rates into lending rates in most countries," Ms Tenreyro said.

On Tuesday, Andrew Bailey described results from countries using negative rates as a "mixed bag".

He said: "It would be a cardinal sin in my view if we said we had a tool in the box which we didn't think could be operationally used.

"Yes it's in the tool bag, but that doesn't mean we're going to use negative rates."