In the Financial Stability Report, BoE warned that “increased Brexit uncertainties have put additional downward pressure on UK forward interest rates and led to a decline in the sterling exchange rate and an underperformance of UK-focused equities.” However, “the UK banking system remains strong enough to continue to lend through the wide range of UK economic and financial shocks that could be associated with Brexit.”
Governor Mark Carney also noted that that material risks of economic disruption remain from no-deal Brexit. And, major financial institutions have done what’s necessary for Brexit. However, he warned that “we can’t fully insulate ourselves from spillovers from Europe where there still are some things to be done.”
Globally, risks to outlook have increased during the first half of the year. BoE said “rising trade tensions have resulted in declining business confidence and pose material downside risks to global output growth.” And, “the impact of these risks would be amplified by continued material underlying vulnerabilities.”
