The next two to three months will be critical for the future of the U.K. economy, Ben Broadbent, deputy governor of the Bank of England, told CNBC Monday.
The U.K. government is racing against the clock trying to clinch a deal with the European Union in the coming weeks. The idea is to have an agreement on how the U.K. will leave the EU in March of next year with enough time for parliamentary approval both in the U.K. and across Europe.
"The sequence of events over the next two to three months could change the outlook materially," Broadbent told CNBC's Joumanna Bercetche.
Following a monetary policy meeting earlier this month, the BOE said the U.K. is set to grow 1.7 percent in 2019 and inflation is likely to hit 2.1 percent during the same period. The central bank's forecasts are based on an assumption that the U.K. will strike a deal with the EU and keep relatively close trade links with the bloc.
"I still think it's the most likely outcome but, of course, over time, every day there are headlines, positive, negative, which will send the currency in particular in one direction or the other," Broadbent said Monday.
Sterling was once again under pressure Monday morning on the back of negative headlines about Brexit. The British media were reporting divisions within Prime Minister Theresa May's circle of key lawmakers, with potentially further resignations from the administration.