BoE’s Carney speaks in parliament on Brexit

Bank of England Governor Mark Carney and other top monetary policy officials from the central bank were speaking to the Treasury Committee in Britain’s parliament on Tuesday.

Below is a selection of their comments.

ON STERLING:

“Implied volatility in sterling is very high right now, much higher than it is for other major currencies, for the obvious reasons of the states of the political discussions you’re all involved in and the importance for the outlook for the economy in the short and medium term.”

“The expectation of those who are active in those markets is that they’re volatile, that it will continue to be volatile for the next month at least.”

“We have emphasized from the start the importance of having some transition between the current arrangements and the ultimate arrangements. So we welcome the transition arrangements in the (European Union) withdrawal agreement. ..and take note of the possibility of extending that transition period.”

CARNEY ON NO-DEAL BREXIT:

“This would be a very unusual situation. It is very rare to see a large negative supply shock in an advanced economy. You would have to stretch back at least in our analysis until the 1970s to find analogies.”

“The issues around Brexit, particularly around a no-deal, no transition Brexit, we have a role (…) but the real issues are going to be in the real economy. So they’ll be about how well the logistics system works, where business confidence is, what access, if any, is there in a true, no-deal transition Brexit.”

“This is not a financial crisis round two, where the Bank of England and other central banks were center-stage, this is a real economy shock and therefore central banks have a role but we’re more of a sideshow.”

CARNEY ON BREXIT TRANSITION:

“We have emphasized from the start the importance of having some transition between the current arrangements and the ultimate arrangements. So we welcome the transition arrangements in the withdrawal agreement. ..and take note of the possibility of extending that transition period.”

CHIEF ECONOMIST ANDY HALDANE ON COMPANIES:

“Notwithstanding the fact that details of the (Brexit) deal remain to be agreed, we are seeing somewhat greater impact on the behavior of companies in particular in the last month or two.

“That could make for a somewhat weaker fourth quarter than we saw in the third quarter, and certainly a more volatile path for output I think over the next few months.”

MPC ECONOMIST MICHAEL SAUNDERS ON COMPANIES:

“I have the impression from talking to businesses (…) that most businesses are not prepared for a no-deal Brexit, and don’t know really how to prepare.”

“As the risk of a no-deal Brexit has become more visible recently, we have seen business confidence weaken and rising uncertainty, and that has had some affect on near-term economic activity.”

Reuters

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