(Bloomberg) — Bank of England Governor Mark Carney said swings in the value of the pound are here to stay as long as there’s uncertainty about the direction of Brexit.
Carney was addressing U.K. lawmakers, speaking for the first time since Prime Minister Theresa May published her proposed European Union Withdrawal Agreement. He also said the outlook for monetary policy and interest rates will depend on how Brexit affects supply and demand — and the currency — in the coming months.
“There will be events that move sterling up and events that move sterling down,” he said. “That will likely continue for the next little while.”
The BOE chief reiterated his view that a disorderly Brexit could produce a supply side shock that is relatively rare for advanced economies, pushing prices higher and forcing the central bank to raise interest rates instead of cut them.
“Implied volatility in sterling is very high right now, much higher than it is for other major currencies, for the obvious reasons of the stakes of the political discussions you are all involved in and the outlook for economy in the short and medium term,” Carney told Parliament’s Treasury Committee.