Carney batters pound with ‘no deal’ warning

MARK Carney sent the pound plunging yesterday with a grim warning about a no-deal Brexit.

Sterling fell to an almost 11-month low as the Bank of England governor said the ‘highly undesirable’ scenario was now an ‘uncomfortably high’ possibility.

He said banks had been ‘put through the wringer’ to ensure they could cope with a worst-case scenario where house prices plunge by a third, interest rates soar, unemployment doubles and the country goes into recession.

Eurosceptics said the intervention would weaken the Government’s hand in negotiations with Brussels.

Mr Carney told the BBC: ‘The possibility of a no deal is uncomfortably high at this point. It is highly undesirable. Parties should do all things to avoid it.’

Asked what no deal would mean, he replied: ‘Disruption to trade ... a disruption to the level of economic activity, higher prices.’

He said the worst-case scenario, which included the economy shrinking by 4 per cent, was not a prediction but an exercise to assess what the financial system could cope with. He said: ‘We have been planning for very difficult circumstances.’

Mr Carney said the Bank’s job was to make sure the financial system kept working, adding no deal was ‘a relatively unlikely possibility but it is a possibility’.

Jacob Rees-Mogg, chairman of the European Research Group of Eurosceptic Tory backbenchers, said: ‘Mark Carney has long been the high priest of Project Fear whose reputation for inaccurate and politically motivated forecasting has damaged the reputation of the Bank of England.’

Fellow Tory MP Peter Bone told the BBC: ‘I’m afraid his predictions were wrong in the past, so why on earth would they be right now? Should he not be grasping the opportunity of coming out of the EU?’

Andrea Jenkyns, of pro-Brexit group Change Britain, said: ‘Mr Carney should focus on preparing for Brexit instead of making overtly political interventions and weakening the Government’s hand at the negotiating table.’