Carney Says Chance of a No-Deal Brexit Is ‘Uncomfortably High’

Sean Reid
August 3, 2018

The Bank of England governor said both the United Kingdom and European Union should "do all things to avoid" a no-deal scenario.

"The financial system will be ready", he said.

The next few months will prove to be laden with risk for Sterling as the EU and United Kingdom try to come to a deal that must be agreed on at the October EU Summit.

Mr Carney added: "We've put the banks through the wringer to make sure that they have the capital".

Sterling slid below $1.30 on the comments and touched a low of $1.2985, while British government bond prices rose.

"So we've gone from the fastest to the slowest growing in the G7, we've had a big shift in sterling - 17 percentage points - and we went through the latter half of 2016 and past year with a real pay squeeze on British households, which we're just getting out of". During a trip to Austria on Wednesday, the foreign secretary, Jeremy Hunt, said the process was "heading for no deal by accident".

"Our responsibility, and now I am moving from the bit of the bank which is responsible for interest rates to the other bit which is responsible for the financial system".

"Our job is to look at what could go wrong".

Mark Carney, Governor of the Bank of England, said rates would need to rise further to bring inflation back to the 2 per cent target over the next few years, but stressed increases would be "limited" and "gradual".

The Bank of England has increased interest rates to their highest level for almost 10 years after the summer heatwave helped the economy bounce back from a snow-hit start to the year. Just after 8.40 a.m. BST (3.40 a.m. ET), the pound was trading at $1.2993, a fall of close to 0.2% on the day.

The intervention suggests the Bank of England governor is growing increasingly anxious that Prime Minister Theresa May's government is running out of time to hammer out an agreement that will prevent disruption to business, trade and consumers.

Sterling has been under pressure since hitting a 1.40 high against Dollars in February following the failing Brexit negotiations with Europe. "Parties should do all they can to avoid it". But this week he has mostly taken away.

The BoE's nine rate-setters were unexpectedly unanimous in their vote to raise rates to 0.75 from 0.50 percent, the level at which they have spent most of the past decade apart from 15 months after the Brexit vote when they were cut even lower.

The pound slipped to below $1.30, its lowest point in eleven days, as Mr Carney issued the warning on negotiations with Brussels.

"Mr Carney revealed himself to be deeply bearish about Brexit and intensely dovish about the future course of interest rates".

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