Bank of England (BOE) Governor Mark Carney gave his backing on Tuesday to a Brexit deal struck by British Prime Minister Theresa May and European Union officials because it would help smooth the country's departure from the bloc.
"We have emphasized from the start the importance of having some transition between the current arrangements and the ultimate arrangements," he said.
"So we welcome the transition arrangements in the withdrawal agreement ... and take note of the possibility of extending that transition period."
May last week agreed a withdrawal deal with Brussels. But it faces stiff resistance in her Conservative Party, meaning it could fail in parliament. The value of sterling fell sharply on concerns that Britain could leave the EU in March with no deal.
Carney, speaking to lawmakers, also said a planned analysis by the central bank of the economic implications of Brexit would not include an assessment of the effect of Britain deciding to stay in the bloc.
"We're not intending to look at providing additional analysis on the third scenario which is no Brexit at all," Carney said.
Carney and other BOE officials speaking alongside him on Tuesday repeated their warning to investors not to assume that the central bank would respond to a no-deal shock by cutting interest rates, as it did after the Brexit referendum in 2016.