Even though Bank of England officials continue to blow hot and cold on whether they will eventually push official UK policy rates below zero to cope with the economic shock caused by the pandemic, markets still expect sub-zero rates by May of next year. The BoE's official line is that it is still reviewing their effectiveness in other regions and sees pros and cons. However, it sent letters on Monday to the UK banks to check their technical preparedness for such a move - the responses to which will be back before year end but not the November policy meeting. Last week markets had pushed their assumption of negative UK rates out to May 2021 from March previously as the mood music on a post-Brexit trade deal with the UK improved. But with still no deal in sight ahead of this week's EU summit and 2nd wave of the pandemic in full flow across Britain and Europe, the effects on the economy over the winter could force the Bank's hand.
Chart by Ritvik Carvalho and commentary by Mike Dolan
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