BoE’s Saunders mulls dual interest rates for UK
Funding banks at less than the policy rate could be a useful tool, MPC member says
A policy of setting dual interest rates could help the Bank of England overcome growing constraints on monetary policy, given its proximity to the effective lower bound, Michael Saunders said on December 4.
The external member of the monetary policy committee suggested the BoE might consider following the European Central Bank in offering banks long-term funding at a rate below the policy rate. The BoE could offer this dual-rate structure through its term funding scheme (TFS), he said in
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