The asymmetric risks of betting on a ‘smooth’ Brexit

Tight spot: Pedestrians walking past the Bank of England in the City of London. The bank is in a tight spot; the weak sterling has led to above-target inflation – about 3 this year – at the same time wage growth continues to lag and living standards decrease. – Bloomberg

THE Bank of England (BoE) basing its forecasts and policy on a ‘smooth’ Brexit ignores its, and Britain’s, asymmetric risks to the downside.

That’s the good news; the bad news is that the BoE probably hasn’t got the tools to handle even a mildly bumpy divorce from the European Union, much less a botched one.