FTSE 100 index mixed in early trading as BoE mulls negative interest rates

UK blue-chip equity barometer FTSE 100 index is mixed in overnight trading, IG data show.

IG's live FTSE 100 futures price estimates showed the index moving sideways along a median price level of 6040 as at 05:15 GMT on Thursday 21 May 2020.

This represents a slight dip from the previous day’s gains, when the Footsie had rallied as many as 120 points and nearly 2% to hit a high of 6075.7.

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FTSE 100 closed up as BoE chair hints of negative interest rates

Despite some dips in the latter part of the day, the stock benchmark was able to close out Wednesday’s (20 May) session 0.40% higher.

The Footsie rose after Bank of England (BoE) chair Andrew Baily reportedly said the UK central bank has not precluded the possibility of negative interest rates.

He was quoted by The Financial Times as saying to the House of Commons Treasury select committee on Wednesday that he had ‘changed his position a bit’ on negative rates, adding that ‘of course we’re keeping the tools under active review in the current situation’.

For now, the BoE will ‘observe how the economy responds to the cuts that we have made’, Bailey stated in reference to the interest rate reduction made in March to a low of 0.1%.

If negative rates are realised, this would be the first time in the BoE’s 324-year history that interest rates have gone sub-zero.

‘Not obvious there will be an immediate bounce back’ for economy

His comments also followed UK chancellor Rishi Sunak’s warning on Tuesday 19 May that the economy is unlikely to follow a quick, ‘v-shaped’ recovery from Covid-19, with unemployment claims rising at a record rate to over two million.

‘We are likely to face a severe recession, the likes of which we haven’t seen, and, of course, that will have an impact on employment,’ Mr Sunak said, adding that ‘it’s not obvious there will be an immediate bounce back’.

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