Mark Carney downgrades Brexit risk to UK financial system

Brexit is no longer the biggest risk to the UK financial system, the Bank of England Governor has declared, adding that the current strength of the economy implies it may soon have to upgrade its f

Speaking to the Treasury Select Committee of MPs, Mark Carney said that the economy was growing more strongly than he or the rest of the Monetary Policy Committee had expected in the wake of the referendum. 

Pressed by committee chairman Andrew Tyrie on whether Brexit remains the biggest domestic risk to the financial system, as he warned before the vote, Mr Carney said: "Strictly speaking, the view of the committee is no", adding: "In the run up to the referendum, we felt it was the largest risk because there were things that could have happened which had financial stability implications.

"Actions were taken to mitigate that, but having got through the day after, the scale of the immediate risks has gone down."

He added that the risks associated with the post-departure transition were greater for the continent than for the UK, but echoed comments from Bank chiefs yesterday that a transitional deal would help reduce volatility in the coming months. 

The comments come amid growing consternation about the Bank's economic forecasts both before and after the vote.

Mr Carney warned about a potential recession and, with other MPC members, voted for lower interest rates and more quantitative easing in the summer.

However, far from facing a recession, the economy grew at the same speed in the three months after the vote as it did in the three months before it.

Mr Carney said that the raft of recent data implied that it would have to upgrade its economic forecasts in next month's Inflation Report.

However, he said he did not agree with his chief economist, Andy Haldane, who, in a public appearance last week, described some of the Bank's forecasting errors as Threadneedle Street's "Michael Fish" moment.

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