(Bloomberg) -- The Bank of England will step up talks on negative interest rates as the economy enters a period of unusual uncertainty.
Policy makers, led by Governor Andrew Bailey voted unanimously to maintain their key interest rate at 0.1% and asset purchase target unchanged at 745 billion pounds ($966 billion) on Thursday. But they also said they’ll hold “structured engagement” with the Prudential (NYSE:PUK) Regulation Authority later this year on how subzero rates could be implemented.
The pound slid to an intraday low, trading down 0.6% at $1.2892 at 12:12 p.m. in London.
Officials said that while recent data has been a little stronger than expected, they still think there is “a risk of a more persistent period of elevated unemployment than in the central projection.”
“The Committee will continue to monitor the situation closely and stands ready to adjust monetary policy accordingly to meet its remit,” the BOE said.
The U.K. is facing a resurgence in virus infections and restrictions, as well as fears unemployment could spike when government aid programs are withdrawn next month. At the same time, Prime Minister Boris Johnson’s threats to redraw his Brexit deal with the European Union could scupper any chance of a trade accord before the Dec. 31 deadline, further boosting economic turmoil.
Economists predict the bond-buying program will be boosted by 50 billion pounds in November, and investors have been betting on rate cuts next year.
Hours before the decision, the Federal Reserve and Bank of Japan both kept rates unchanged, with the Fed signaling U.S. rates will stay near zero for at least three years. The BOE repeated its pledge not to tighten until U.K. inflation, currently at 0.2%, is sustainably moving to its 2% target.