BoE policymaker Silvana Tenreyro said in a Sunday Telegraph interview that the evidence from negative interest rates in Eurozone and Japan “has been encouraging”. Negative rates had succeeded in lowering companies’ borrowing costs while maintaining bank’s profitability.
“There has been almost full pass-through of negative rates into lending rates in most countries,” she added. “Banks adapted well – their profitability increased with negative rates largely because impairments and loss provisions have decreased with the boost to activity and the increase in asset prices.”
The V-shaped recovery in the UK economy is threatened by resurgence of infections locally, and a weak global economy. “Flare-ups like we’re seeing may potentially lead to more localized lockdowns and will keep interrupting that V,” she said. “Another factor interrupting the V is a very weak global outlook, with high uncertainties, particularly with a second wave already striking many countries.”
Swiss Q2 GDP contraction revised up to -7.3% on benchmark revision
Swiss GDP contraction in Q2 was revised to -7.3%, up from -8.2%, after “benchmark revision” based on international recommendations” . SECO noted, though, “he interpretation of this data from an economic perspective is remaining largely unchanged.”
“As well as the decision to ease public health restrictions relatively early, the industry mix in the Swiss economy also helped to prevent an even more drastic slump in GDP,” SECO added. In particular, the 0.3% increase in chemical and pharmaceutical industry stabilized the result for manufacturing as a whole:.
Still, demand fell across the board, with private consumption down 08.1% in the wake of the pandemic and the containment measures. Equipment investment dropped -10.0%. Exports dropped -6.5% while services dropped -15.3%.
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