Bank of England Governor Mark Carney warns of technical recession if UK votes to leave Europe
Mark Carney the Governor of the Bank of England has given a strong warning that leaving Europe could leave to a recession.
“Such a vote might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short term,” the minutes said.
“A vote to leave could have significant implications for asset prices, in particular the exchange rate. The MPC would have to make careful judgements about the next effects of these potential influences on demand, supply and inflation. Ultimately, monetary policy would be set in order to meet the inflation target, while also ensuring that inflation expectations remained anchored.”
The minutes continued: “Whatever the outcome of the referendum, the MPC would use its tools to achieve its inflation remit.”
“Taken together, these developments highlighted the risk that the economy could slow somewhat in the second quarter,” the minutes said.
They also said it would be harder to read data over the coming months.
“Referendum effects are likely to make macroeconomic and financial market indicators harder to interpret over the next few months, and the committee is likely to react more cautiously to data news over this period than would normally be the case,” they said.
The Bank’s policymakers reiterated their previous message that when interest rates do start to rise they will do so “more gradually and to a lower level than in recent cycles”.
In its latest World Economic Outlook the IMF downgraded its growth forecast for the UK to 1.9% for 2016, compared with a forecast for 2.2% made in January.