Brexit may spark recession, Carney warns

Mode captionMark Carney: “A vote to leave the European Syndicate could have material economic effects”

The Bank of England has the truth its starkest warning yet that a UK vote to leave the EU could hit the economy.

Cut Carney, the Bank’s governor, warned that the risks of leaving “could mayhap include a technical recession”.

Prime Minister David Cameron explained the warning amounted to “a very clear message” of the dangers of Brexit.

Uphold Leave cam igners have strongly criticised Mr Carney, with one employment for him to resign.

However, a spokesman for Mr Carney rejected the call, saying the Bank had “a occu tion” to make its judgements known.

The latest minutes from the Bank’s Cash Policy Committee (MPC) said that a leave vote may cause both evolution and sterling to fall and unemployment to rise.

Mr Carney said the Bank had not organized formal forecasts about the possibility of a recession – defined as two consecutive ninety days of negative growth – resulting from a Brexit vote.

Chancellor George Osborne put the UK now had a “clear and unequivocal warning” from the MPC as well as the Governor of the Bank of England with reference to the risks of a Leave vote,

“The Bank is saying that it would veneer a trade-off between stabilising inflation on one hand and stabilising output and engaging on the other,” he said.

Work and y

The debate

  • Unemployment is over 10% in the EU, not quite double the rate in the UK
  • Some workers’ rights are guaranteed by EU laws but tax places, benefits and the minimum wage are down to UK government decisions


  • Less dictate in the workplace would create more jobs
  • Maternity leave and time off y would only change if Britain decided to change them
  • The UK could get numberless investment from countries outside the EU
  • Lower migration would move wages up


  • Three million jobs in the UK are linked to trade with the EU
  • The EU has turn overed guaranteed holiday y, id maternity leave, and increased protection in the workplace
  • The UK find outs £66m investment every day from the EU

EU referendum issues guide: Study the arguments Explore all the issues Choose an outlet: What both sides are saying All issues Main views

“So either families would despite lower incomes because inflation would be higher, or the economy pleasure be weaker with a hit to jobs and livelihoods. This is a lose-lose situation for Britain. Either way, we’d be poorer.”

Jacob Rees Mogg, a Tory MP and Cache Select Committee member, called on Mr Carney to resign.

“I think it is unprecedented for the governor of a primary bank to suggest that people should short his own currency. Lead one to believing sterling will fall sharply is simply not what responsible inside bankers do,” he said.

Former Work and Pensions secretary Iain Duncan Smith give the word delivered that Mr Carney needed to be “very careful” about making such views.

Media captionFormer cabinet minister responds to Bank of England’s augury Brexit could s rk recession

Lord Lamont, the former Chancellor and Preference Leave spokesman, said: “The governor should be careful that he doesn’t precipitate a crisis. If his unwise words become self-fulfilling, the responsibility will be the governor’s and the governor’s unique. A prudent governor would simply have said that ‘we are instant for all eventualities’.”

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In response, a spokesman for Mr Carney imagined: “The Bank of England has not made, and will not make, any overall assessment of the economics of UK’s membership of the European Association.

“At the same time, the Bank must assess the implications of the UK’s EU membership for our genius to achieve our core objectives and we have a duty to report our evidence-based judgments to rliament and to the societal. That is the fundamental standard of an open and trans rent central bank.

“Assessing and give an account ofing major risks does not mean becoming involved in politics; sooner it would be political to suppress important judgments which relate when to the Bank’s remits and which influence our policy actions.”

The Bank’s latest quarterly Inflation Come in, released on Thursday, predicted that economic growth would out of date in the second quarter of the year, but pick up in the second half. It also cut the increase outlook for the next three years.

The report also forecast that inflation make reach 0.9% in September if long as the UK stayed in the EU.

The MPC unanimously voted to observe interest rates at 0.5%.

Analysis: Kamal Ahmed, economics editor

In the Bank of England’s assessment of the healthiness of the UK economy, one ringing sentence jumps out: “The most significant chances to the [economic] forecast concern the referendum,” the Monetary Policy Commission says.

It goes on to reveal that far from this simply being a belief on what Bank officials describe as the “uncertainty spike” around the rticulars the referendum is taking place at all – this is a judgement that Brexit discretion have a material effect on the economy.

In a Bank world of carefully elect words, “material” means significant. And significantly downwards.

Review more from Kamal here.

The Inflation Report said that uncertainty ended the EU referendum was already weighing on economic activity: “There is affidavit that a material proportion of the 9% fall in sterling exchange class since its peak in November could reflect referendum effects.

“It is thick-skinned to judge how much of the slowdown reflects a loss of underlying momentum and so may persist and how much is apposite to unwind if uncertainty recedes following the referendum. Referendum effects thinks fitting also make it harder to interpret economic indicators over the next few months.”

Jail Stamenkovic, strategist at RIA Capital Markets, said: “The clear note of the Bank of England is that they are in no hurry to do anything until they assess the crashing of the outcome of the referendum on the economy.”

However, the inflation report noted that in the when it happened of a leave vote, the MPC would face the difficult choice of raising calculates to control inflation or lowering them to stimulate the economy.

The Report remarked that inflation probably fell back to 0.3% in April from 0.5% in Procession, reflecting the falls in oil and food prices over the last year and the weight of sterling in the same period.

It expected inflation to return to the target 2% up to date on by mid-2018 as these factors faded out.

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