DUBLIN: Volatility in financial markets and the economy is to be expected as the talks between Great Britain and the rest of the European Union proceed on the former’s decision to leave the economic and political bloc, the head of Ireland’s central bank said Sunday.
“The design and timing of the new relationship between the U.K. and the EU remain quite uncertain,” Philip Lane said in remarks prepared for delivery at an event here. “It is reasonable to expect some volatility in financial markets and macroeconomic variables as the negotiations move along, with harder versions of Brexit likely to be associated with more substantial reassessments of growth prospects and asset prices for both the U.K. and the EU.”
The comments come after Britain’s currency, the pound, tumbled on Friday, highlighting the risk that uncertainty about Britain’s future relationship with the EU could weigh on financial and currency markets. Recent comments made by British Prime Minister Theresa May suggest she will prioritize slowing immigration into the country, a path that risks limiting Britain’s access to the EU’s single market in the post-Brexit arrangement and a move that many economists say could hurt Britain’s growth prospects.
Brexit is expected to seriously weigh on the Irish economy as well, given the close ties between the two countries. Lane said the Irish central bank had cut its growth forecast for next year to 3.6% from 4.2% “as a result of Brexit, while also calling out further adverse Brexit-related developments as a specific downside risk.”
