The Bank of England has told commercial banks to prepare for the possibility of negative interest rates. This last hypothetical spanner in the toolbox of monetary stimulus — since rates are stuck close to zero anyway and quantitative easing through bond-buying programmes has diminishing effects — sounds weird and worrying but has already been in use in Europe for some time. Its intended effect is to push the commercial banks to lend more to business by penalising them for depositing cash with central banks. But what on earth does it mean for personal savers?
The fact is that all monetary policy since 2008 has been designed to stimulate moribund economies and keep companies alive on a broad front — with collateral impacts on individuals. Small savers have earned below-inflation returns on deposits, while those rich enough to own portfolios of blue-chip shares and bonds have become notionally richer as QE has boosted asset values.
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