The Bank of England’s new head, Andrew Bailey, said Friday that his central bank was “not out of firepower,” noting that it could cut interest rates below zero if necessary.
Mr. Bailey, who started his job in March and was delivering a speech at the Kansas City Fed’s virtual Jackson Hole symposium, underlined that he and his colleagues saw negative rates as a possible tool to stoke economic growth at a time when interest rates were already at very low levels across advanced economies.
The central bank has “made clear that our box does include other tools, including the possibility of negative rates,” Mr. Bailey said. “We are not out of firepower by any means, and to be honest it looks from today’s vantage point that we were too cautious about our remaining firepower” before the coronavirus pandemic.
Global central banks including the Bank of Japan and the European Central Bank have cut interest rates below zero, which is meant to discourage banks from stashing their cash at central banks and instead push them to lend more. Fed officials, on the other hand, have regularly ruled such a policy out. They say they doubt whether such tools are effective and do not think that they would work well in the United States.
Mr. Bailey first indicated earlier this month that negative interest rates could be a possibility in the United Kingdom.
President Trump has at times called for negative rates in the United States, pointing out that other central banks have lowered borrowing costs below zero and arguing that America’s reticence to do so puts it at a competitive disadvantage.
The Fed sets its policies independently of the White House.
Companies can stop withholding payroll taxes from employees’ paychecks beginning Sept 1. But those employees would still have to pay the tax through larger withholdings — and less take-home pay — by April.
That guidance, released by the Treasury Department in coordination with the Internal Revenue Service on Friday evening, offered little clarity about what companies will have to do about the deferred withholdings if a worker ends up leaving the business before the end of the year. The guidance said that “the affected taxpayer may make arrangements to otherwise collect the total applicable taxes from the employee,” suggesting companies can hold workers liable for the tax even if they leave the company.
The awaited guidance is intended to help companies understand their obligation stemming from an executive action signed by President Trump this month that gives workers a tax holiday. The White House had been seeking ways to move the tax liability away from workers entirely so that they are not faced with a big tax bill next year. That legally dubious idea proved to be unworkable, however,
The president, who had been calling for a permanent payroll tax cut, has said that he will push for Congress to waive the deferred taxes next year if he wins re-election.
Stocks continued their rise on Friday. The S&P 500 — now in record territory — rose 0.67 percent for its seventh consecutive daily gain. And the Dow Jones industrial average crossed into positive territory for the year.
Shares of the cruise operators Carnival Corp. and Norwegian Cruise Line Holdings were among the best performers of the day, with gains of more than 6 percent. Delta Air Lines, United Airlines and American Airlines also gained.
Outside of the U.S., Japanese shares were roiled by news that Japan’s prime minister, Shinzo Abe, would step down because of ill health. Tokyo’s Nikkei, which had been in positive territory before the announcement about Mr. Abe, finished 1.4 percent lower.
Mr. Abe’s decision to step down as Japan’s longest-serving prime minister could mark the end of “Abenomics,” his combination of monetary easing, fiscal stimulation and corporate reform. The policies restored some economic health to Japan, but its promises of change in the corporate world — including efforts to empower women, reduce the influence of nepotism and change entrenched work culture — remained unfulfilled.
U.S. consumer spending rose 1.9 percent in July, the Commerce Department said Friday, beating analyst expectations and offering a glimmer of hope for an economic recovery after the devastation of the…