The Bank of England's (BoE) Minutes of the Monetary Policy Committee (MPC) meeting showed that the MPC did not wish to send a signal that a negative bank rate was "in prospect or even imminent."

Market reaction

The GBP/USD pair rose sharply on this development and gained nearly 100 pips in the last 30 minutes. As of writing, the pair was posting small daily gains at 13650. According to Reuters, money markets are now pricing a negative BoE rate in February 2022, compared to August 2021 before the policy announcements. 

Additional takeaways

"On balance, it concluded overall that it would be appropriate to start the preparations to provide the capability to do so if necessary in the future."

"The MPC agreed to request that the Prudential Regulation Authority’s (PRA) should engage with PRA-regulated firms to ensure they commence preparations in order to be ready to implement a negative bank rate at any point after six months."

"The PMC understood that the PRA would make such a request by way of a follow-up letter to CEOs of PRA-regulated firms."

"The MPC stressed actions should not be interpreted as a signal that the setting of a negative bank rate or a tiered system of reserve remuneration were imminent or indeed in prospect at any time."