BOE Official Warns of Pound's Fate If EU Trade Deal Isn't Reached
17 October 2018 - 5:10PM
Dow Jones News
By Paul Hannon
The British pound could weaken significantly if the U.K. were to
leave the European Union without a new trade agreement, one of the
Bank of England's deputy governors told lawmakers Wednesday.
Testifying to lawmakers during his reappointment hearing, Jon
Cunliffe said the currency "could see a big fall" if it became
clear that the U.K. was going to leave without an agreed framework
for trading with the bloc.
"At some point, when the true Brexit is revealed, I'm pretty
sure you'll see the exchange rate move," he said. "If a kind of bad
Brexit outcome happens, we'll see something on the exchange
rate."
Mr. Cunliffe all but ruled out an intervention in the foreign
exchange markets to support the currency should it slide.
"Currency intervention to maintain an exchange rate is not
something that is particularly effective in modern markets," he
said, in response to a lawmaker's question. "Intervening in the
exchange rate is not really part of my thinking."
The pound fell sharply after the U.K. voted to leave the
European Union in June 2016, pushing inflation higher and squeezing
incomes. The BOE has raised its key interest rate twice since
November 2017 after cutting borrowing costs following the Brexit
vote. It has said those moves assume a "smooth" Brexit.
Mr. Cunliffe's warning came as Prime Minister Theresa May
prepared to meet the leaders of the other 27 members of the EU
during a summit that had been billed as an important steppingstone
toward a deal. However, the talks hit a stalemate at the weekend
over the Irish border.
(END) Dow Jones Newswires
October 17, 2018 11:55 ET (15:55 GMT)
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