Are negative interest rates off the table?

This is Money Podcast

This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 7 August 2020

⏱️ 55 minutes

🔗️ Recording | iTunes | RSS

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Summary

Interest rates may have been slashed to the bone in the wake of the coronavirus crisis but the threat of a dive into negative rates has remained.

This week, however, the Bank of England opted to stick at 0.1 per cent and upgraded its view on the economy for this year, saying GDP will only fall by a worst-in-a-century 9.5 per cent rather than a worst in 300-odd years 14.4 per cent.

It also hinted that negative rates could do more harm than good, so does that mean a base rate below zero is off the table for the UK?

On this week’s podcast, Simon Lambert and Georgie Frost discuss negative rates: what’s the point, do they have any positives and beyond costing savers’ interest how would they prove harmful?

They also talk gold and why the price of the precious metal has soared 35 per cent this year, to rise above the $2,000 mark and whether it can keep going.

For goldbugs it is a long-term store of value, a safe haven and a hedge against inflation, but will fears of bumper inflation at the end of the decade prove unfounded - and is part of the gold price sentiment-driven in the same way Tesla shares are?

Buying gold and taking rates negative are seen as glass-half-empty measures, but are things brighter than we think?

The housing market is doing better than expected, car sales have posted a surprise 11 per cent annual rise and Britain went mad for eating out at the start of the week, thanks to Rishi Sunak’s discount deals. Are these indicators of a V-shaped recovery?

The job losses that continue to pile up will weigh on that and the team have tips on what to do if you are made redundant or it is a threat.

And finally, if you do fancy splashing out and have your eye on a new car, you might think it is time go electric. Simon runs through What Car?’s new special awards for the best electric cars in every category.

Transcript

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0:00.0	Welcome to This Is Money podcast, brought to you in partnership with Charles Stanley Direct, the award-winning investment platform trusted by over 40,000 clients. Investment involves risk.
0:11.1	I'm Georgie Frost, and alongside me today is editor Simon Lambert and are negative interest rates off the table.
0:17.7	The Bank of England says rate cuts are now less affected than QE stimulus,
0:22.2	as the UK's economic outlook brightens. So with that in mind, have we all been a bit too
0:27.5	gloomy about the financial situation of the nation as a result of coronavirus? Ian Duncan Smith
0:33.2	is warning of economic Armageddon, but the property market is bouncing back as we all want
0:38.1	to move to the country. Car sales are up and we're all dining out on the cheap thanks to the government.
0:43.6	Plus, we look at gold, it's soaring, but will it last, and the best electric cars you can buy
0:48.8	whatever your budget. And don't forget, you start up to date with all the latest breaking
0:52.4	money news, just go to this ismoney.com.uk or download the app. But first, the Bank of England is discussing negative
0:59.7	interest rates as a measure to deal with the financial fallout from coronavirus. But will they
1:04.7	really go there? There were four pages in its most recent monetary policy report dedicated to
1:10.4	outlining the pros and cons of such a move
1:12.8	for households, banks and for the broader economy. Now, uncertainty is, as the bank admits,
1:18.7	the name of the game for now, and it seems to be keeping its options open in terms of the future
1:23.6	of monetary policy. But it did say, though, in amongst all of that, that negative interest
1:28.7	rates could be less effective than other stimulus measures. So firstly, welcome Simon. Why would
1:35.3	the Bank of England be thinking about negative interest rates anyway? What good would it do?
1:41.0	It said it's looking at households, it's looking at banks and the broader economy.
1:44.7	So with all of those in mind, what would be the point?
1:49.6	I suppose before we get onto the negatives of negative interest rates,
1:53.9	we should talk maybe about the positives, about why this idea even exists in the first place.
	...

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