‘Financial markets vastly underestimated the outcome of the referendum. There was a violent, brutal, immediate massive move, the pound went down by 10 percent. But there was no panic and the central bankers did the job that they were prepared to do just in case, which was to put a lot of liquidity on the markets,’ Christine Lagard said at a forum organized and held by Aspen Institute in Colorado (Reuters).
Lagarde, however, said that how markets react from here depends on what steps UK and European policymakers take to deal with the separation vote and limit uncertainty.
"At this point in time, policy makers both in the UK and in Europe are holding that level of uncertainty in their hands. How they come out in the next few days is going to really drive the direction in which risk will go," Lagarde said.
She said policymakers and multilateral institutions needed to work cooperatively to deal with the implications of the Brexit vote, and noted that only Britain can trigger the formal divorce proceedings -- European politicians cannot force their hands.