Low rates are not a punishment for savers, says Bank of England official

A Bank of England official has defended low interest rates, saying it was not a matter of punishing savers.

Bank of England deputy governor Ben Broadbent was answering questions put by callers during BBC Radio 4's Money Box programme, including one from a saver who described returns as "derisory".

During the programme, he also declined to give "promises" about possible future interest rate rises, saying "Who knows?" when probed about possibilities for 2018.

Mr Broadbent told the caller who highlighted the issue of low savings rates: "You have my great sympathy, as do many savers, I count myself as a saver, for the fact of very low interest rates.

"Our objective is to stabilise the economy, to stabilise inflation.

"It is a fact around the world, not just in this country but globally, that the interest rate required to do that has come down. It was depressed even further by the financial crisis.

"It is therefore very difficult if you want to merely save assets in money in short-term deposits to get any sort of return."

The caller said that people like him were being "punished" for the way banks had been run.

Mr Broadbent responded: "I don't think that's the case. It's not simply a straightforward question about punishment. These interest rates have been falling globally.

"I think this has been a global trend even before the financial crisis."

He continued: "Ultimately, there is a single level of interest rate that is required to keep the economy on an even keel.

"It is not the MPC's (Monetary Policy Committee's) job to pluck a number for interest rates out of the air and say: 'Well it would be nice if there were a higher return on savings'.

"I agree that, all else equal, that would be better, but the problem with that is, had we kept rates at 6%, 5% whatever they were before, I can tell you as a matter of fact, the economy would have been in almost permanent recession.

"The jobless rate would have been far, far higher, any other assets you own other than your deposits, equities, your housing, the prices of those would have fallen a great deal further, so it is not as simple, unfortunately, as saying: 'We could just set this number and everything else would be fine'."

Mr Broadbent was also asked by the programme about the outlook for future interest rates, and whether there would be one or two more rises this year.

He said: "Well, who knows this year? We said over the three-year period of the forecast, I think we had another two or three."

He said he was "not going to give any promises" because there are regular meetings where the evidence is reconsidered at each point.

Earlier in the programme, Mr Broadbent had said the Bank was broadening its interaction with schools and developing its website as part of efforts to engage directly with the public.

He said: "We are conscious that the standard material we put out is, rather dry and technical, we do a lot of dry and technical things, but equally the effectiveness of our policies relies on their being understood and appreciated."