Leaviss: Why the Bank of England should cut interest rates

INTEREST RATES

Jim Leaviss, head of retail fixed interest at M&G, argues the Bank of England must cut interest rates to a new low to help banks repair margins, rather than leave them to punish mortgage customers.

I had lunch last week with a Bank of England MPC member, and I asked him why the Bank did not cut rates below 0.5% in order to help the banking sector improve its Net Interest Margins (NIMs) and thus its capitalisation. The MPC member replied that it was a matter of record that the Bank had discussed a rate cut in the autumn but rejected it because of some technical reasons around the operations of the money markets (which nobody seems able to fully explain) and because the feed through into the banks' funding costs would likely be limited. The MPC member replied it was a matter of re...