Carney Defends BOE's Publication of Worst-Case Brexit Analysis

(Bloomberg) -- Mark Carney defended the publication of the Bank of England’s Brexit scenarios, telling Parliament that the institution couldn’t hold back its analysis once lawmakers had asked for it.

The BOE last week released a report on Prime Minister Theresa May’s deal and other Brexit outcomes. Its worst-case scenario for a chaotic exit sees the economy shrinking by 8 percent within a year, property prices plunging almost a third and the pound losing a quarter of its value to below parity with the dollar.

The BOE’s scenarios were more extreme than the government’s, and prompted criticism from some lawmakers, who accused Carney of undermining the BOE’s credibility.

Key Insights

  • Speaking in front of the Treasury Committee, Carney reiterated that the central bank’s analysis laid out scenarios, not forecasts. The main takeaway should be that the BOE found that U.K. banks could withstand any outcome, he said, adding there is a low probability of the worst-case Brexit scenario materializing.
  • Responding to criticism of the publication, Carney said that’s an “unfair” attack. He said the BOE doesn’t have the luxury of holding back material if the Treasury Committee demands it. The bank have been discussing the worst-case scenario in private for a couple of years.
  • During the hearing Labour lawmaker John Mann thanked Carney for the analysis, which he said was “vital as part of this country’s democracy.” He also dubbed the criticism of the Governor by Brexiteer Jacob Rees-Mogg as being “contemptuous of Parliament.”

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  • Theresa May was scheduled to open five days of debate of her Brexit deal on Tuesday, before an expected vote on Dec. 11. Still, her attempt to sell it has been torpedoed after opposition parties were granted an emergency debate on whether her government is in contempt of Parliament for refusing to its release legal advice about the plan.
  • In a column for Bloomberg Opinion Tuesday former BOE Governor Mervyn King accused May’s government of “incompetence of a high order.” He also took a swipe at the bank’s analysis, saying it “saddens me to see the Bank of England unnecessarily drawn into this project.”

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