Bank of Eng­land ready for wide range of Brexit out­comes

The Gulf Today - Business - - FRONT PAGE -

DUBLIN: The Bank of Eng­land and Bri­tain’s largest banks are well pre­pared for a dis­or­derly Brexit, the cen­tral bank’s gover­nor Mark Car­ney said on Fri­day, amid re­ports he had warned it could trig­ger a house price crash.

Bri­tish me­dia had re­ported late on Thurs­day that Car­ney had told se­nior min­is­ters ear­lier in the day that a chaotic Brexit could lead to house price falls of up to 35 per cent over three years as well as spi­ralling in­ter­est rates.

Car­ney did not ad­dress this prospect di­rectly in his speech at Ire­land’s cen­tral bank, though these pro­jec­tions are sim­i­lar to sce­nar­ios the BOE told banks last year to en­sure they had guarded against.

“The Bank of Eng­land is well­pre­pared for what­ever path the econ­omy takes, in­clud­ing a wide range of po­ten­tial Brexit out­comes,” Car­ney said, stick­ing close to pre­vi­ous lan­guage on prepa­ra­tions for Brexit.

“We have used our stress test to en­sure that the largest UK banks can con­tinue to meet the needs of UK house­holds and busi­nesses even through a dis­or­derly Brexit, how­ever un­likely that may be. Our job, af­ter all, is not to hope for the best but to plan for the worst,” he added.

Bri­tish eco­nomic growth has slowed since June 2016’s Brexit vote, though that has not stopped the BOE rais­ing in­ter­est rates twice in just over a year, as it has judged longer­run prospects for non-in­fla­tion­ary growth had weak­ened.

The BOE said af­ter its Septem­ber Mon­e­tary Pol­icy Com­mit­tee meet­ing that fu­ture rate moves would de­pend heav­ily on how house­holds, busi­nesses and fi­nan­cial mar­kets re­acted to Brexit.

“The ap­pro­pri­ate pol­icy re­sponse is not au­to­matic and will de­pend on the bal­ance of the ef­fects on de­mand, sup­ply, and the ex­change rate,” Car­ney said on Fri­day.

In the mean­time, un­cer­tainty around Brexit had weighed on pay growth, al­though re­cent data still showed a pick-up, he said.

The bulk of Car­ney’s speech fo­cused on the long-term im­pact of tech­no­log­i­calchangeonem­ploy­ment.

“At present, there is lit­tle ev­i­dence to go on to judge the likely size and per­sis­tence of any in­creas­ing in struc­tural un­em­ploy­ment. Mon­e­tary pol­icy mak­ers will need to re­main alert to this pos­si­bil­ity, up­dat­ing their as­sess­ment as the tran­si­tion oc­curs,” he said.

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