No early move on interest rates despite economic woes

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BANK of England policymaker Charlie Bean yesterday played down the prospect of any early move to use so-called “negative interest rates” to help buoy the economy.

On Tuesday, fellow deputy governor Paul Tucker had raised the possibility that the central bank could charge lenders to hold their money. Such a move could encourage banks to lend to companies instead, possibly boosting growth.

But Bean described it as “blue sky thinking”, stressing this was just one idea among many that officials had considered and rejected in a regular review of more radical options.

“Any suggestion that we have a plan to introduce negative interest rates immediately, I should make absolutely clear, is not the case,” Bean said when asked about Tucker’s comments. But he added that policymakers should be open to new ideas.

Bean’s remarks came as official figures showed the UK economy expanded by a modest 0.2 per cent in 2012, compared with a previous estimate for no growth.

However, the Office for National Statistics left the figure for the final three months of the year unchanged at a quarterly contraction of 0.3 per cent, while the revised data revealed household spending grew at the slowest rate in a year.

David Tinsley, UK economist at BNP Paribas, said: “It really underlines that the growth trajectory into this year is at best weak and could even be falling.”

Colin Edwards at the Centre for Economics and Business Research said the UK economy remained in a “fragile state”.