Carney Is Said to Warn Rates May Rise in No-Deal Brexit Meltdown
2018-09-14 07:52:22.614 GMT

By David Goodman and Robert Hutton
(Bloomberg) — Mark Carney gave a stark warning of the dangers of a no-deal Brexit that could see mortgage rates raised even as economic output and house prices tumble.
The Bank of England governor joined the U.K. cabinet, chaired by Prime Minister Theresa May, to share worst-case economic scenarios used by the central bank, people familiar with the matter said. He told those present that crashing out without an agreement would lead to a fall in the pound and higher tariffs, pushing inflation higher.
That would make it harder to cut borrowing costs to support the economy as the BOE did in the aftermath of the Brexit vote in 2016, said the people, who who asked not to be named because the discussions were private.
Carney outlined an extreme scenario in which house prices fall by 35 percent, even as mortgage rates increase. The BOE has previously run stress tests showing that banks could cope with such a situation.
A spokesman for the BOE declined to comment.
Central bank policy makers, who cut rates to a record-low
0.25 percent in August 2016, have increased borrowing costs twice in the past year to keep inflation in check. Officials have previously said that Brexit could prompt a policy move in either direction.

2008 Comparison

The Times earlier reported details of the meeting, while the Guardian reported that Carney warned that a no-deal Brexit could be as catastrophic for the U.K. economy as the 2008 financial crisis. The BOE declined to comment on both of those reports.
Read More: Carney’s No-Deal Brexit Comments Could Weigh on Housebuilders
Chancellor Philip Hammond announced this week that Carney will stay on an extra seven months to ensure continuity during the transition out of the the EU after the U.K. formally exits in March 2019.
Carney’s role in the Brexit debate stirs controversy. While some saw him a pillar of stability in the aftermath of the referendum, euroskeptics have criticized him for wading too far into the political debate with overly-gloomy predictions. Jacob Rees-Mogg, a Brexit purist, called him the “high priest of project fear.”
Carney’s high-impact appearance came as the BOE’s Monetary Policy Committee voted unanimously Thursday to hold interest rates unchanged at 0.75 percent after hiking at the last gathering in early August. They reiterated that Brexit was the biggest challenge to the outlook and that uncertainty about the U.K.’s future outside the EU had risen.

To contact the reporters on this story:
David Goodman in London at dgoodman28@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net To contact the editors responsible for this story:
Paul Gordon at pgordon6@bloomberg.net;
Flavia Krause-Jackson at fjackson@bloomberg.net

---

Archr LLP is Authorised and regulated by the Financial Conduct Authority (FCA reference 617163).
Archr LLP is not covered by the Financial Services Compensation Scheme (FSCS).
Archr is registered in England and Wales No. OC371018. Registered office 115B Drysdale Street, Hoxton, London, United Kingdom, N1 6ND

This message may contain confidential or privileged information. If you are not the intended recipient, please advise us immediately and delete this message. The unauthorised use, disclosure, distribution and/or copying of this email or any information it contains is prohibited.

This information is not, and should not be construed as, a recommendation, solicitation or offer to buy and sell any securities or related financial products. This information does not constitute investment advice, does not constitute a personal recommendation and has been prepared without regard to the individual financial circumstances, needs or objectives of persons who receive it.

You are receiving this email because you are a valued client of Archr.