Bank of England chief hints he will stay to help with Brexit

September 04, 2018 - 6:56 am

LONDON (AP) — Bank of England Governor Mark Carney all but confirmed Tuesday that he is to stay at the helm of the central bank for longer than planned to help ensure Britain leaves the European Union as smoothly as possible.

Following days of speculation about an extension beyond his planned June 2019 departure, Carney told a committee of lawmakers that during "this critical period" everyone, including central bankers, should do what they can to help the Brexit process.

Carney, a Canadian, took the top job at the Bank of England in July 2013 on a five-year basis. He extended it by a further year in the aftermath of Britain's decision to leave the EU in June 2016.

"Even though I have already agreed to extend my time to support a smooth Brexit, I am willing to do whatever else I can in order to promote both a smooth Brexit and an effective transition at the Bank of England," he said Tuesday.

With Brexit due March 29, 2019, Carney confirmed he has been in talks with Britain's Treasury chief, Philip Hammond, about extending his tenure again.

Carney, who is believed to have ambitions to return to Canadian politics, has said the government will announce details "in due course." Media reports have suggested his tenure may be extended by about a year.

Many backers of Brexit have accused Carney of taking sides during the Brexit referendum campaign, of being a leading proponent of so-called "Project Fear" when warning of the economic consequences of a vote to leave the EU. But many in the financial markets have been calling on Carney to stay longer to help reduce uncertainty.

The British government's discussions with the EU have struggled to make headway over the past few months, and Prime Minister Theresa May has suffered a series of resignations from her cabinet, including those of Boris Johnson as foreign secretary and David Davis as Brexit secretary.

Her latest proposals for Brexit, which would involve Britain maintaining many EU rules and regulations so British firms can keep trading more or less seamlessly in the European single market, have run into resistance both in the EU and within May's Conservative Party, which does not have a majority in parliament.

With the opposition Labour Party also seemingly split over how to approach Brexit, concerns have risen that Britain will end up crashing out of the EU with no deal and no transition period after Brexit day to help smooth the process.

Though Carney said last month that the risks of a no-deal Brexit were "uncomfortably high," he said Tuesday that some sort of agreement is still more likely.

"The negotiations are getting to a critical stage and there's still a wide range of views of potential outcomes and sometimes things don't evolve as expected, so there is a chance for downside risks," he said.

He added, however, that "what we're seeing is still an economy that by and large is operating as if there will be some form of agreement and some form of transition."

Only 20 percent of firms have contingency plans in the event of no deal on Brexit, he said.

Last month, the Bank of England raised its main interest rate by a quarter of a percentage point to 0.75 percent even though the economy has slowed. The main reason the bank raised rates is inflation has risen above the 2 percent target, largely as a result of a 15-percent fall in the pound in the wake of the Brexit vote.

Following Carney's comments, the pound was little change, down 0.2 percent at $1.2941.