Bank of England (BOE) Governor Andrew Bailey said the central bank was aware of the challenges that would arise if negative interest rates were applied in the banking system and at the same time he did not deny that such methods could be used to generate the economy.
Bailey noted that if most retail banks continue to offer positive interest rates to investors then that would reduce the effectiveness of the BoE negative rates. Thus, he stressed that the central bank remains aware that the process mechanism can be affected if negative interest rates are applied.
The sterling currency jumped half a cent against the US dollar following Bailey's comments on interest rates before declining.
Investors have considered that there is a possibility for the BoE to follow the lead of the European Central Bank and the Bank of Japan, as well as other central banks by setting interest rates below zero for the first time.
However, Deputy Governor Dave Ramsden said on Monday that he thought the central bank's main interest rate remained at the current level of 0.1%.
Bailey on the other hand commented that the British economy performed stronger than the BoE had expected in recent times and there were signs that the recovery was moving slowly.
