Sat, Sep 15, 2018 - Page 10 News List

BOE warns hard Brexit might lift mortgage rates

PROPHET OF DOOM?UK lawmaker Jacob Rees-Mogg, a prominent advocate of full Brexit, mocked central bank governor Mark Carney as the ‘high priest of project fear’


Bank of England (BOE) Governor 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.

Carney joined the UK Cabinet, chaired by British 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 bank did in the aftermath of the Brexit vote in 2016, said the people, 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 bank 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 over the past year to keep inflation in check.

Officials have previously said that Brexit could prompt a policy move in either direction.

The Times of London earlier reported details of the meeting, while the Guardian reported that Carney warned that a no-deal Brexit could be as catastrophic for the UK economy as the 2008 financial crisis.

The bank declined to comment on either of those reports.

British Chancellor of the Exchequer Philip Hammond this week announced that Carney is to stay on an additional seven months to ensure continuity during the transition out of the EU after the UK formally exits in March next year.

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.

UK Member of Parliament Jacob Rees-Mogg, a Conservative and prominent advocate of full Brexit, called Carney the “high priest of project fear.”

Carney’s high-impact appearance came as the bank’s Monetary Policy Committee on Thursday voted unanimously to hold interest rates unchanged at 0.75 percent, after hiking them at the last gathering in early last month.

They reiterated that Brexit was the biggest challenge to the outlook and that uncertainty about the UK’s future outside the EU had risen.

This story has been viewed 1294 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top