During a special cabinet briefing on Thursday (held after the BoE rate decision) tasked with discussing preparations for the UK leaving the EU, BoE governor Mark Carney had some very stark warnings.
According to cabinet sources who spoke with UK press, the governor essentially told UK PM May and a group of senior ministers that the UK leaving the EU without a deal would trigger a financial catastrophe of similar proportions to the crash of 2008.
Unemployment to Hit Double Figures In Percentage Terms
Carney warned May that in such circumstances, unemployment could quickly hit double percentage figures, house prices could come off by around 30% over three years, and transport links with the EU could come to a halt. Carney also warned that the pound would likely collapse, with inflation spiraling out of control.
These projections were made as part of Carney’s “worst case scenario” though they do echo previous comments made by the governor and other BoE members regarding the severity of the economic damage that the UK would likely suffer in the event of a “no deal” Brexit.
Carney Extends Term As Governor
Carney told parliament last week that he will extend his term as BoE governor to 2020 in a bid to help the government through the Brexit transition phase as smoothly as possible. While his remarks are shocking, it is worth considering that these relate to the very worst case scenario. Indeed, these projections were likely welcomed by May as she continues along the hard path of gaining parliamentary approval for her Chequers Brexit plan.
GBPUSD was unphased by Carney’s comments, continuing to rally on the week against a weaker USD. Price has now broken back above the 1.3045 level and is fast approaching a retest of the broken bullish trend line from 2016 lows.