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BoE governor willing to extend term to 'smooth' Brexit transition

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BoE governor willing to extend term to 'smooth' Brexit transition

Bank of England Governor Mark Carney hinted Sept. 4 that he would be willing to extend his term as the central bank's head in order to minimize disruption as the Brexit process unfolds, and said the Chancellor of the Exchequer would make an announcement in due course.

Amid much speculation that the governor would extend his agreed term for another year, Carney, who originally signed up for a five-year term rather than the standard eight years, told the House of Commons' treasury select committee he was willing.

"I am willing to do whatever else I can to promote both a smooth Brexit and an effective transition at the Bank of England," Carney said. His current departure date is June 2019, after having already extended his term by one year.

The market was largely unmoved, with yields on 10-year U.K. bonds unchanged on Sept. 4 at 1.4% while the pound regained some of the ground lost earlier in the day against the dollar, but was still down 0.20% in the session at $1.28 as of 9 a.m. ET.

Regarding monetary policy, Carney made it clear that until there are clearer signals from the government about the final Brexit deal, the bank would not be adjusting its forecasts on interest rate changes.

Carney also warned that while the market widely deems a "no-deal" Brexit an unlikely scenario, the possibility is "uncomfortably high" and many businesses have done little to prepare for the outcome, noting that less than 20% of firms are putting in place contingency plans for a no-deal.

The governor stressed the potential for further currency depreciation in the event of a no-deal scenario, with the European Union would create a "real income cost squeeze."

The pound has endured another rocky week with the market absorbing a declining manufacturing PMI — at 52.8, down from 53.8 in July — the weakest for more than two years. While the EU's chief Brexit negotiator, Michel Barnier, appeared to dismiss the notion that the EU will agree to U.K. Prime Minister Theresa May's proposal in the summer at Chequers.

The bank's chief economist, Andy Haldane, warned that a further inflation shock from Britain's exit from the EU could persist "for several years."