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Bank of England warns that Brexit continues to pose risks to outlook

Published 09/22/2016, 05:01 AM
© Reuters.  BoE warns that U.K.'s decision to leave the EU continues to pose risks to financial stability

Investing.com – The Bank of England (BoE) warned on Thursday that the U.K.’s decision to leave the European Union (EU), known as a Brexit, still poses risk to the British economy despite recent resilience.

The BoE’s Financial Policy Committee (FPC) released the minutes for its September 20 meeting on Thursday and noted that the financial system has demonstrated “resilience to spikes in uncertainty and risk aversion” in response to the results of the June 23 referendum but remained cautious towards the outlook.

“Although financial stability has been maintained in the United Kingdom through a period of volatility, and a number of economic indicators have picked up from their post-referendum low points, the United Kingdom faces a challenging period of uncertainty and adjustment,” the minutes revealed.

The FPC pointed out that it would continue to assess the financial stability implications of the U.K.’s decision to withdraw from the EU and evaluate the transition to its new relationship with the European bloc.

The FPC defined the current outlook for financial stability in the U.K. as “challenging” and warned that “heightened uncertainty about the near-term macroeconomic outlook and the U.K.’s future relationship with the EU is reinforcing domestic risks.”

In particular, the FPC pointed to the British real estate market and stated that “the risks of a sharp adjustment are crystallizing”.

“Prices have fallen and transactions are at their lowest level since 2009,” it explained.

The FPC further noted that there is a risk borrowing costs could rise and that households will not be able to undertake debt repayments.

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