AFP, London :
The Bank of England on Thursday warned that uncertainty over the outcome of next month’s EU referendum was already weighing on British growth, as it left interest rates unchanged.
BoE Governor Mark Carney meanwhile said that should Britain vote on June 23 to leave the European Union, the country risks suffering a “technical recession”, or two successive quarters of negative growth, as jobs disappear and the value of the pound slumps.
The Bank of England, presenting its latest economic projections alongside a routine monthly policy decision, said there were “increasing signs that uncertainty associated with the EU referendum has begun to weigh on activity”.
It added that “a vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy”.
Later addressing a press conference, Canadian national Carney said a recession was a possible outcome of a Brexit vote, although he gave no formal projections.
Prime Minister David Cameron seized upon the governor’s comments, saying they sent a “very clear message” of the risks of Brexit.
And finance minister George Osborne said following the BoE’s updates that families in Britain “would face lower incomes because inflation would be higher, or the economy would be weaker with a hit to jobs and livelihoods”.
Michael Hewson, chief analyst at trading group CMC Markets UK, said that while Osborne’s comments were to be expected, the Bank of England “wasn’t that much more optimistic about how the economy would perform in the event of a recovery in the aftermath of a vote to remain”.
The central bank on Thursday forecast gross domestic product (GDP) growth of 2.0 percent this year, down from a prediction of 2.2 percent made in February.
GDP was expected to hit 2.2 percent next year, slightly down on an earlier forecast of 2.3 percent, the BoE added.
“Given the economy’s recent weakness, it is no great surprise that the forecast for GDP growth this year has been cut,” said Vicky Redwood, chief UK economist at Capital Economics research group.
“Yet an assumed unwinding of Brexit effects post-referendum has not stopped the 2017 and 2018 forecasts from being cut too.”
The downgrades were made alongside the central bank’s announcement that its policymakers had voted unanimously to keep the BoE’s main interest rate at 0.50 percent, where it has stood for more than seven years.
Britain next month holds a closely-watched referendum on whether or not it should stay in the EU, and opinion polls are showing that the nation is still largely undecided on the issue.
Explaining its decision to leave interest rates on hold, the BoE pointed to very low British inflation, which at 0.5 percent in March remains far below the bank’s 2.0-percent target.
At its meeting on Wednesday, the central bank voted also to maintain the amount of cash stimulus, or quantitative easing (QE), pumping around the economy at œ375 billion ($542 billion, 475 billion euros).
The Bank of England on Thursday warned that uncertainty over the outcome of next month’s EU referendum was already weighing on British growth, as it left interest rates unchanged.
BoE Governor Mark Carney meanwhile said that should Britain vote on June 23 to leave the European Union, the country risks suffering a “technical recession”, or two successive quarters of negative growth, as jobs disappear and the value of the pound slumps.
The Bank of England, presenting its latest economic projections alongside a routine monthly policy decision, said there were “increasing signs that uncertainty associated with the EU referendum has begun to weigh on activity”.
It added that “a vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy”.
Later addressing a press conference, Canadian national Carney said a recession was a possible outcome of a Brexit vote, although he gave no formal projections.
Prime Minister David Cameron seized upon the governor’s comments, saying they sent a “very clear message” of the risks of Brexit.
And finance minister George Osborne said following the BoE’s updates that families in Britain “would face lower incomes because inflation would be higher, or the economy would be weaker with a hit to jobs and livelihoods”.
Michael Hewson, chief analyst at trading group CMC Markets UK, said that while Osborne’s comments were to be expected, the Bank of England “wasn’t that much more optimistic about how the economy would perform in the event of a recovery in the aftermath of a vote to remain”.
The central bank on Thursday forecast gross domestic product (GDP) growth of 2.0 percent this year, down from a prediction of 2.2 percent made in February.
GDP was expected to hit 2.2 percent next year, slightly down on an earlier forecast of 2.3 percent, the BoE added.
“Given the economy’s recent weakness, it is no great surprise that the forecast for GDP growth this year has been cut,” said Vicky Redwood, chief UK economist at Capital Economics research group.
“Yet an assumed unwinding of Brexit effects post-referendum has not stopped the 2017 and 2018 forecasts from being cut too.”
The downgrades were made alongside the central bank’s announcement that its policymakers had voted unanimously to keep the BoE’s main interest rate at 0.50 percent, where it has stood for more than seven years.
Britain next month holds a closely-watched referendum on whether or not it should stay in the EU, and opinion polls are showing that the nation is still largely undecided on the issue.
Explaining its decision to leave interest rates on hold, the BoE pointed to very low British inflation, which at 0.5 percent in March remains far below the bank’s 2.0-percent target.
At its meeting on Wednesday, the central bank voted also to maintain the amount of cash stimulus, or quantitative easing (QE), pumping around the economy at œ375 billion ($542 billion, 475 billion euros).
