You are here: Home » Reuters » News
Business Standard

BoE will be "prudent not passive" after Brexit - Carney

Reuters  |  LONDON 

By David Milliken

LONDON (Reuters) - of England policymakers will be "prudent not passive" after Britain leaves the European Union, keeping a close eye on exchange rate moves and other factors affecting inflation, said on Wednesday.

Britain is due to quit the EU on March 29, though is struggling to find parliamentary support for the transition deal she agreed with the bloc in November, without which there is a risk of chaos at Britain's borders.

As parliament ressumed debating May's plans on Wednesday after a holiday pause, Carney warned the pound risked a further decline if markets judged economic ties between Britain and the EU were being weakened.

"The nature of that partnership is currently the subject of feverish debate in parliament and the prospects for sterling will depend heavily on how Brexit actually progresses," he said in his first public comments of 2019.

The BoE and Britain's banks are ready for whatever form Brexit takes, Carney said in an that focused on the future of cash and the BoE's views on crypto-currencies.

"From a monetary policy perspective, the is well-prepared for whichever path the takes. We have the tools we need. We will be prudent not passive," he said.

Brexit jitters were visible in a rise in British banks' funding costs and a fall in the share prices of companies that were focused on domestic markets in Britain, he said, though broader volatility also reflected global trade concerns.

The BoE has previously said interest rates could move in either direction if Britain suffers a disruptive departure from the EU this year, though many economists doubt whether the central would raise rates in the face of the shock of a chaotic Brexit, even if sterling tumbles.

Financial markets see only around a 50 percent chance that the BoE will raise interest rates this year, and economists say the outlook depends heavily on Brexit.

On Wednesday, Carney noted that falls in sterling tended to have a material and lasting upward effect on inflation in Britain. However, sterling moves are not the only factor that would drive interest rate decisions, he added.

Separately, Carney said China's yuan could potentially become a future global reserve currency alongside the U.S. dollar, though this was likely to lag behind the increase in the size of China's relative to that of the

"The U.S. overtook Britain's in the second half of the 19th century, but it took until the 1920s before it became a dominant currency in international trade," he said.

Carney made similar comments in 2011 when he headed the of Canada.

(Reporting by David Milliken; Editing by William Schomberg/Mark Heinrich)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, January 09 2019. 23:37 IST
RECOMMENDED FOR YOU