Falling pound '˜helping the economy' says BoE deputy

In a speech at the Wall Street Journal in London, Ben Broadbent said there was “little doubt” the economy had performed better than surveys initially suggested after the referendum.

The deputy governor for monetary policy said this was likely thanks to the “underlying momentum in domestic demand”, a surprisingly resilient housing market, as well as the post-Brexit vote slump in sterling.

He highlighted that the pound’s rapid depreciation, and a general easing in financial conditions, have supported the economy.

Data released on Wednesday showed that Britain’s powerhouse service sector continued to recover from a shock contraction after the Brexit vote, with the latest purchasing managers’ index signalling new business expanded at its fastest pace since February.

Mr Broadbent explained that currency markets tend to trade on long-term risks and that the pound fell on fears of what the referendum result might mean for the UK’s access to global markets.

But given that there have been no immediate changes to the UK’s international trading arrangements in the wake of the vote, the drop in sterling is actually proving to be a boon for the British economy, he added.

He said: “Against that backdrop, the fall in the exchange rate will help to support activity, cushioning the impact of greater uncertainty.

“While that was expected, the effect could be coming through faster than we’d anticipated.”

His comments came as the pound plummeted to fresh 31-year lows against the dollar, dropping as low as 1.269 versus the greenback at one stage.