Carney deems a No-deal Brexit 'highly undesirable'

  • img Harvey Cawdron
  • POSTED ON 03 Aug 2018

Claims

Mark Carney, the Bank of England governor, has told the BBC that a no-deal Brexit is 'uncomfortably high' and 'highly undesirable'. 

Carney stated that the prospect of the UK leaving the bloc without a deal was 'a relatively unlikely possibility, but it is a possibility'. He also said that it was 'absolutely in the interest' of both parties to have a transition period. 

But, the financial system was strong and could survive shocks. He said that 'We have made sure that banks have the capital, the liquidity that they need and we have the contingency plans in place'. 

After Carney's comments, at 9:15am, the value of the pound was $1.30.

Carney claimed that the occurrence of a no-deal Brexit would cause disruption to both trade and economic activity, and would lead to higher prices for a period of time. 

Whilst speaking to BBC's Today Programme, he said 'Our job in the Bank of England is to make sure that those things don't happen. It's relatively unlikely but it is a possibility. We don't want to have people worrying that they can't get their money out'. He further stated that 'We've put the banks through the wringer to make sure that they have the capital. Whatever the shock could happen from, it could come from a no-deal Brexit, we've gone through all the risks of a no-deal Brexit.' 

But, he did say that even with liquidity and capital, banks were unable to amend all the financial problems that occur as a result of Brexit. He stated that 'There are a few things the EU government has to solve', adding that 'The UK has taken all the steps, all the secondary legislation it needs to. The European authorities still have some steps they need to take. We're having conversations and we expect those to be addressed.'

Carney's claims came just a day after the Bank of England's Monetary Policy Committee unanimously voted to increase interest rates from 0.5% to 0.75% - the highest they have been since March 2009. He said that the expectations of the financial market that rates will reach 1.5% over the next 3 years were 'not a bad rule of thumb, given the current state of the economy', however he added that due to the 'uncertainty of the economy', this was not a 'prediction' or a 'guarantee'.