The British began to stock up on cash. Anyway, talking about this fresh figures indicating that the amount of funds withdrawn from the financial system, expanded at the fastest pace since the financial crisis.
According to Sky News, a few weeks after the referendum on leaving the EU the rate at which households and businesses increase their savings in cash bills and coins, rose to 8% for the first time since 2009
In other words, the British increasingly prefer to keep their money in cash, not in Bank accounts. The reasons for this behavior are not known, however we can assume that it’s the lack of confidence in the financial system. However, a much more logical explanation that links the actions of people with actions of the Bank of England.
After Brexit almost all are waiting for the regulator of stimulus measures, including lower rates and even the introduction of negative rates. In such circumstances, to keep money in the banks is impractical, and so people withdraw their savings.
Note that the graph shows the correlation of the index with a reduction in rates. By the way, yesterday the Bank of England lowered interest rates for the first time since 2009 – from 0.5% to 0.25%. Although, the Central Bank said that while no plans to introduce negative rates, things can change quite quickly.
In monetary terms, the amount of banknotes and coins outside the banking system increased from late may to 1.2 billion pounds, compared with the previous year by 5.9 billion pounds. It is the largest annual increase in history.
Sky News leads and another interesting observation. The share of banknotes in circulation outside the banking system, either in people’s pockets or from outside of the country, is currently made up as a percentage of GDP, the highest level since 1979.
The Bank Of England
The monetary policy Committee of the Bank of England voted unanimous 9 votes for a rate cut. The latest data of business activity suggests that the United Kingdom probably wants to see small GDP growth in the second half of this year,” the Bank’s statement says.
