DUBLIN (Reuters) - The Bank of England and Britain’s largest banks are well prepared for a disorderly Brexit, the central bank’s governor Mark Carney said on Friday, amid reports he had warned it could trigger a house price crash.
British media had reported late on Thursday that Carney had told senior ministers earlier in the day that a chaotic Brexit could lead to house price falls of up to 35 percent over three years as well as spiraling interest rates.
Carney did not address this prospect directly in his speech at Ireland’s central bank, though these projections are similar to scenarios the BoE told banks last year to ensure they had guarded against.
“The Bank of England is well-prepared for whatever path the economy takes, including a wide range of potential Brexit outcomes,” Carney said, sticking close to previous language on preparations for Brexit.
“We have used our stress test to ensure that the largest UK banks can continue to meet the needs of UK households and businesses even through a disorderly Brexit, however unlikely that may be. Our job, after all, is not to hope for the best but to plan for the worst,” he added.
British economic growth has slowed since June 2016’s Brexit vote, though that has not stopped the BoE raising interest rates twice in just over a year, as it has judged longer-run prospects for non-inflationary growth had weakened.
The BoE said after its September Monetary Policy Committee meeting that future rate moves would depend heavily on how households, businesses and financial markets reacted to Brexit.
“The appropriate policy response is not automatic and will depend on the balance of the effects on demand, supply, and the exchange rate,” Carney said on Friday.
In the meantime, uncertainty around Brexit had weighed on pay growth, although recent data still showed a pick-up, he said.
The bulk of Carney’s speech focused on the long-term impact of technological change on employment.
“At present, there is little evidence to go on to judge the likely size and persistence of any increasing in structural unemployment. Monetary policy makers will need to remain alert to this possibility, updating their assessment as the transition occurs,” he said.
Writing by David Milliken; Editing by Andy Bruce and Toby Chopra