LONDON (AP) — The Bank of England warned Thursday that Britain could fall into recession should voters opt in a June referendum to leave the European Union — a stark assessment from an institution known for being independent of political campaigns.
In the most damning remarks to date on the consequences of a so-called Brexit, Bank of England Governor Mark Carney said that the risks of such a vote would have material consequences for both growth and inflation and “could possibly include a technical recession.”
After a meeting in which they decided to keep interest rates on hold, members of the Monetary Policy committee said that a vote to leave the EU could prompt households and firms to delay spending, lowering demand for labor and causing unemployment to rise.
“If there were a vote to leave, that would have material consequences for both growth and inflation and therefore affect the stance of monetary policy,” the bank said in its quarterly report on the outlook for the economy.
The intervention underscores the increasing concern on the part of the central bank ahead of the so-called Brexit vote on June 23. Carney said he had a responsibility to offer the bank’s analysis of what might happen given that a Brexit would affect the economy.
“We’re providing information as best we can about our potential reaction,” he said.
Even without the shock potential of Brexit, there are concerns the economy is beginning to falter. The nine policymakers unanimously agreed in their meeting to leave the key interest rate at a record low of 0.5 percent and slashed the growth forecast for the economy this year to 2.0 percent from 2.2 percent in its last report in February.
Recent reports have suggested that the Bank of England has warned commercial banks to prepare for a rate reduction if the country votes to leave the 28-nation bloc in the June 23 referendum.
But in the absence of Brexit, the next move in interest rates is more likely to be up, the Bank of England said. The pound rose on that expectation, as higher rates tend to bolster a currency. It rose 0.5 percent since the Bank of England decision, to $1.4518.
The central bank joins economists at the International Monetary Fund, the Organization for Economic Co-operation and Development and the U.K. Treasury in warning of the consequences of a British exit.
Treasury chief George Osborne quickly tweeted the results of the bank’s report, suggesting a British exit from the EU represented a dangerous cocktail of trouble for the economy.
“Big moment in EU debate: Bank of England warns vote to Leave would mean both materially lower growth and higher inflation,” he wrote. “It’s a lose-lose.”
However, campaigners for the campaign to leave the 28-nation bloc dismissed the news as another aspect of creating fear among voters by their opponents.
“First war, then genocide, now a recession,” Leave.EU headlined in its response. “More scaremongering shows the panic in the heart of the establishment.”