Monetary stimulus? Low rates mean more babies, Bank of England says

LONDON (Reuters) – Cutting interest rates appears to stimulate more than just the economy – Bank of England researchers say an extra 14,500 babies were born in 2009 after the central bank slashed borrowing costs during the global financial crisis.

Fergus Cumming and Lisa Dettling, the BoE researchers, wanted to see if the influence of central bankers went as far as families considering whether or not to have a baby.

They estimated that for each one percentage point reduction in benchmark interest rates, birth rates rose by 5% among families paying adjustable-rate mortgages that go up or down along with the BoE’s Bank Rate.

“On average for the UK, a one-percentage-point decline in the policy rate increases birth rates by 2%,” they said in a paper published on Friday.

In contrast with Britain, the birth rate in United States fell during the period studied by the researchers, something they linked to the prevalence of fixed-rate mortgages in the United States and the impact of property price declines.

“Our descriptive comparisons with the U.S. suggest that if more families had been able to obtain a lower interest rate, the U.S. might not have experienced as severe of a ‘baby bust’ in the Great Recession,” they said.