‘Brexit un­cer­tainty has less ef­fect than thought’

The Sun (Malaysia) - - SUNBIZ -

LONDON: Po­lit­i­cal and eco­nomic un­cer­tainty be­fore and af­ter Bri­tain’s vote to leave the European Union (EU) has proved to be less of a drag on eco­nomic growth than might have been ex­pected, Bank of Eng­land (BoE) pol­i­cy­maker Kristin Forbes said yes­ter­day.

Forbes, who voted against restart­ing gov­ern­ment bond pur­chases in Au­gust, said cen­tral banks should not use un­cer­tainty as an ex­cuse to avoid mak­ing de­ci­sions or for the BoE to change its ap­proach to set­ting pol­icy.

But she said un­cer­tainty was hard to mea­sure, and may be cur­rently hav­ing less of an ef­fect on Bri­tain’s econ­omy.

“The strength of the UK econ­omy dur­ing the pe­riod of height­ened un­cer­tainty be­fore and af­ter the ref­er­en­dum on EU mem­ber­ship sug­gests that un­cer­tainty is drag­ging less on growth than has tra­di­tion­ally oc­curred,” she said.

One rea­son could be that some fac­tors which typ­i­cally fed into econ­o­mists’ mea­sures of un­cer­tainty – such as neg­a­tive me­dia re­ports and an un­usu­ally wide range of growth fore­casts – played less of a role than thought. An­other was that rises in un­cer­tainty typ­i­cally led to tighter credit con­di­tions, with busi­nesses and con­sumers find­ing it harder to bor­row money. This had not hap­pened in Bri­tain af­ter June’s ref­er­en­dum.

“Nonethe­less, even though height­ened un­cer­tainty has re­cently ap­peared to have less ef­fect on the UK econ­omy than ex­pected, that does not mean that it has had no ef­fect, or will have no ef­fect in the fu­ture,” she said. – Reuters

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