Vote for Brexit would risk recession in UK, Bank of England warns
The Bank of England said Britain's economy would slow sharply, and could even fall into recession, if the country voted to leave the European Union and said there were limits to what the bank could do about it.
In its starkest warning so far about the impact of an "Out" vote in the June 23 referendum, the central bank said sterling could fall sharply and unemployment would probably rise.
"In that scenario we would expect a material slowing in growth, a notable rise in inflation, a challenging trade-off," BoE Governor Mark Carney told a news conference.
"Of course there's a range of possible scenarios around those directions, which could possibly include a technical recession," he said in response to questions from reporters.
Jitters about the referendum are already weighing on the economy and the central bank trimmed its growth forecast for this year to 2pc from February's estimate of 2.2pc, even if Britain votes to stay in the EU.
Mr Carney said there were limits to what the BoE could do in response to an "Out" vote. "Monetary policy cannot immediately offset all the effects of a shock," he said.
Prime Minister David Cameron, who along with finance minister George Osborne, has tried to focus voters on what Brexit would mean for their incomes, said the central bank "couldn't be more clear" that leaving the EU was a risk.
Opinion polls suggest British voters have been relatively resistant so far to warnings about the economic costs of Brexit, with voting intentions in many polls roughly evenly split.
But Mr Carney's comments ahead of Scotland's 2014 referendum on the costs of independence were viewed as swaying some voters.
He is due to make a high-profile speech at London's Mansion House a week before the vote, alongside Mr Osborne, giving them another platform to raise the dangers of Brexit.
Supporters of Brexit argue Britain would benefit from less EU regulation and could strike better overseas trade deals on its own. Some have accused Carney of over-stepping the central bank's line of political neutrality.
Sterling rose to a six-day high against the dollar after the Bank's policymakers voted unanimously to keep interest rates on hold, pouring cold water on talk that at least one policymaker might vote for a cut.
The BoE said half of sterling's 9pc slide over the past six months was probably due to the referendum and said it could "depreciate further, perhaps sharply" after an "Out" vote.
Mark Carney said it was the BoE's duty to speak about the short-term economic risks of leaving the bloc. (Reuters)