Mr Carney last week delivered a damning forecast showing how the British economy will be affected by Brexit. His scathing report suggested Britain could be plunged into worse economic chaos than during the 2008 global financial crisis as the BoE chief warned of severe financial disruption under all Brexit scenarios. But his remarks were disregarded as scare-mongering by Brexiteers and critics of Mr Carney who were quick to dismantle the catastrophic predictions. Mr Carney stood defiant on the report today as he maintained the BoE delivered what had been asked of them by MPs.
Speaking to lawmakers, the BoE chief said the scenarios reflected preparatory work to ensure banks and other lenders were ready for Brexit, and were not off-the-cuff forecasts.
Defending the projections, he said: “We had a core team of 20 senior economists working on this for a couple of years.
“They drew in another 150 professionals from across the Bank.
“Plus two senior committees, the MPC and the FPC [the monetary and financial policy committees].
“There’s no exam crisis. We didn’t just stay up all night and write a letter to the Treasury Committee.
“You asked for something that we had, and we brought it and we gave it to you.”
Mr Carney stressed the worst-case scenarios were “low-probability events in the context of Brexit” which the central bank needed to consider to make sure Britain’s banking system could withstand any shocks.
He said: ”What you should take away from the worst-case Brexit scenarios is that the UK banking system has the capital, separately detailed the liquidity, the overall resilience to withstand that and be part of the solution not the problem.”
The 88-page analysis of a worst case scenario revealed that in the event of a no-deal Brexit, Britain’s economy could plummet by eight percent in the first quarter of 2019 from its current level.
The pound would reportedly slump by a quarter to less than parity against both the US dollar and the euro.
According to the study, inflation would jump by 6.5 percent while the unemployment rate could surge by 7.5 percent.
In the event of a disruptive Brexit, where there would be no change to border trade or financial markets, the BoE warned GDP could fall by three percent from its level in the first three months of next year.
This scenario would see the unemployment rate increase to 5.75 percent and inflation to 4.25 percent.