Markets Unconvinced By BoE Smooth Brexit Assumption

The Bank of England is taking it for granted that we’ll see an orderly Brexit. Investors aren’t as confident.

While Governor Mark Carney said the U.K. central bank may have to raise rates sooner than markets are expecting, he also said that’s based on new forecasts that presume a “smooth” adjustment to the new relationship with the European Union. Traders questioned the likelihood of such an outlook, and sent the pound down.

Carney’s relatively upbeat forecasts contrast to last year, when his prediction that growth would take a hit if Britain voted to leave the EU didn’t pan out. He came under fire from pro-Brexit campaigners for his pessimism. As a rule, the BOE incorporates government policy into its forecasts as it’s stated, and didn’t model the possibility of a disorderly Brexit.

Bloomberg

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