Bank of England warns on Brexit vote

The Bank of England escalated its warnings about the fallout from a British vote to leave the EU next week, saying it could harm the global economy and that sterling looked increasingly likely to fall further after an “Out” decision.

The BoE’s monetary policymakers also discussed the bank’s contingency plans to protect the banking system in the event of an “Out” vote, including closer supervision of banks to ensure they have access to the liquidity they need.

They said the referendum was the largest immediate risk facing British financial markets, repeating previous language about the vote, but this time they said markets and economies around the world could be at risk too.

“Through financial market and confidence channels, there are also risks of adverse spillovers to the global economy,” minutes of the June 15th meeting of the bank’s monetary policy committee said.

Billions of dollars have been wiped off global stock markets in the run-up to the June 23rd referendum and yields on government bonds in several countries have hit record lows.

Bank of England governor Mark Carney has faced increasingly hostile criticism from supporters of a British exit from the EU who accuse him and the bank of making unnecessary warnings about the risk of a hit to the economy from a Brexit vote. Mr Carney has said the bank has a duty to spell out what is likely to happen to the economy.

Other institutions have also warned of a hit from a Brexit vote and the International Monetary Fund is expected to detail its forecasts today.

The BoE’s nine rate-setters voted unanimously to keep interest rates at their record low of 0.5 per cent at their meeting, the BoE said.

Warnings

UK finance minister George Osborne, who is struggling to keep voters focused on his message that a ‘Leave’ vote would hurt them financially, tweeted the bank’s latest warnings, as another opinion poll showed the “Leave” campaign in the lead.

US Federal Reserve chairwoman Janet Yellen on Wednesday acknowledged the UK’s possible exit from the EU as a factor for keeping US interest rates on hold and the Bank of Japan said Brexit was its biggest near-term concern.

BoE policymakers said it was “increasingly likely” sterling would fall further after a vote to leave the EU, perhaps sharply. Shifts in the pound’s exchange rate around the publication of opinion polls had reinforced their view that a big part of sterling’s weakness recently was down to uncertainty around the referendum. – (Reuters)