Ben Broadbent: Pound fall has been a "shock absorber"

Caitlin Morrison
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Broadbent said it was important to have a flexible currency (Source: Getty)

The decline in sterling after the UK voted to leave the European Union has acted as a shock absorber for the economy, according to Bank of England deputy governor Ben Broadbent.

"Having a flexible currency is an extremely important thing, especially in an environment when your economy faces shocks that are different from your trading partners," Broadbent told BBC Radio 5.

"In the shape of the referendum, we've had exactly one of those shocks. Allowing the currency to react to that I think is a very important shock absorber."

Sterling plunged after the referendum in June, and while it recovered some of its losses over the summer, the pound has recently been sliding again, hovering around a 31-year low.

The pound has been in decline over the past two weeks, since a so-called flash crash during which sterling dropped six per cent in two minutes.

Sterling is relatively steady this morning, after ending last week in a slump.

What is going on with sterling?

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