Rush to meet net-zero target could see Sonia, SOFR collapse

Policy inaction could halt benchmarks’ normalisation, BoE biennial exploratory scenario finds

Late or insufficient action to tame climate change could impact some of the main benchmark rates significantly, the Bank of England (BoE) projected in its 2021 biennial exploratory scenario (BES) exercise.

The BES considers two pathways to net zero greenhouse gas emissions: an early action (EA) and a late action (LA) scenario. It also includes a no additional action (NAA) scenario.

Under the LA scenario – where governments rush to reach a 2050 net-zero target in just two decades – the sterling