“The political choice would be to suppress the analysis”.
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The BoE press office rejected calls for Carney to resign over the comments, saying the Bank had “a duty” to make its judgements known. “It is the judgment of the independent MPC (monetary policy committee) and it is the judgment of all members of the MPC”, BoE governor Mark Carney said.
The report marks the central bank’s most detailed assessment of the potential effects of a Brexit, and may leave officials open to fresh criticism that they support the Remain camp.
In a Bank world of carefully chosen words, “material” means significant.
The report states that a vote to leave the European Union could “materially alter the outlook for output” and that “there are increasing signs that uncertainty associated with the European Union referendum has begun to weigh on activity”. Most economists still expect the central bank to raise interest rates early next year if Britain stays in.
“The main message for business from the inflation report is that while the current interest rate policy will be conducive to maintaining stability, much greater efforts will be needed on the part of the government to boost growth at a time when circumstances will remain hard”.
There are already “increasing signs that uncertainty associated with the European Union referendum has begun to weigh on activity”, the BOE said, noting that growth slowed in the first quarter and further deceleration is expected in the second quarter.
But it admitted that, in the event of a Brexit, it would face a hard “trade-off” between bringing inflation down and supporting growth.
What’s more, the Bank believes that slow growth will continue into the second quarter of the year.
Yet the Bank’s halls are home to some of the best and brightest economists the United Kingdom has to offer.
The latest minutes from the Bank’s Monetary Policy Committee (MPC) yesterday said that a Leave vote may cause both growth and sterling to fall and unemployment to rise.
The BoE said half of sterling’s 9% slide over the past six months was probably due to the referendum, and it could “depreciate further, perhaps sharply” after an “Out” vote.
The BoE might hint at the economic effects of the uncertainty surrounding Brexit, possibly by showing a bigger-than-usual scope for the economy to underperform its central forecasts, Walker said. The actual path Bank Rate will follow over the next few years will depend on economic circumstances.
Carney has been pretty unequivocal in his belief that Brexit risks are “the biggest risks facing the United Kingdom economy”, in recent weeks.
His answer? It would be wrong for the Bank – responsible for financial stability – not to give its considered view, given the “shock” impact of a Brexit vote.
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March’s Industrial production improved from -0.2% to 0.3% month-on-month disappointing forecasts of a 0.5% growth, while production avoided the forecast -0.4% year-on-year contraction by contracting from 0.1% to -0.2%.
