Bank of England governor Mark Carney has warned interest rates could rise in the event of a no-deal Brexit if a cliff-edge withdrawal sends the pound into freefall.
Mr Carney said there are scenarios where policy “might need to be tightened in the event of a no deal, no transition Brexit”, should a plunge in the value of the pound cause inflation to surge and impact UK production.
He stressed a no-deal Brexit was “not the most likely scenario”, but said the Bank had to be prepared for the worst case and this could mean rates moving in “either direction”.
The Bank’s boss also cautioned that monetary policy might not be able to help soften the economic blow of a no-deal disorderly Brexit.
His comments came as the Bank’s nine-strong Monetary Policy Committee voted unanimously to leave interest rates unchanged at 0.75 per cent as it awaits the outcome of Brexit talks.