U.K. rEADy to Bump up rAtEs As EArly As MAy

new trading relationship with the EU.

Bank Governor Mark Carney said “developments regarding the United Kingdom’s withdrawal from the European Union are the most significant influences on — and sources of uncertainty about — the economic outlook.”

That means that forecasts are liable to change in light of what Carney has called the “twists and turns” of the Brexit process.

When more clarity emerges over what Brexit actually will entail when Britain leaves the EU in March 2019, Carney said the Bank of England will need to adjust its forecasts.

In recent weeks, the minority Conservative government has become increasingly split over how to handle Brexit. While some lawmakers in Prime Minister Theresa May’s party want close ties with the remaining 27 EU nations and a period of transition, others want a more fundamental break that would see Britain diverge more profoundly on matters related to regulations and trade. Meanwhile, the views of the opposition Labour Party are also unclear.

May hopes to agree soon on the terms of a transition deal with the EU that would see Britain remain in the tariff-free European single market and customs union for a period after Brexit day. That would give firms and households time to adjust to a new relationship with the EU — Brussels has said any transition period should finish by the end of 2020.

Carney has argued strongly that an agreement on a transition deal has to be secured by the end of the first quarter this year so businesses can plan ahead. Many firms have held back investment and some, particularly in the financial sector, have warned they could relocate some activities into the EU if there is no clarity soon.

For now, the Bank of England has to deal with the economic backdrop as it is and that — despite this week’s volatility in stock markets — is more benign than it anticipated just three months ago and certainly more so than after the Brexit vote in June 2016.