Bank of England governor Mark Carney says the central bank has remained independent in the Brexit debate, despite its recent warnings on economic uncertainties around the referendum.
Speaking to the Treasury Select Committee, Carney says there is “no possibility” of the central bank having been influenced by the government on taking a firm position on the EU referendum, saying “we have not supported a side campaign”.
Carney responded to accusations from conservative MP Jacob Rees-Mogg, who backs the Leave campaign, that the BoE governor had become “politically involved” in the Brexit debate, saying this “fundamentally undermines the standing of the Bank of England”.
Carney says: “[The BoE has] a responsibility under our remit to report not just the current trade-off that may hold in terms of returning inflation to target in a sustainable manner, but the principle risks around that trade-off.”
He says the referendum decision could “materially change the trade-off”.
But Rees-Mogg says: “I think you have become politically involved…why should anybody trust you to set interest rates?”
Carney’s comments come after the BoE was vocal on the impacts a Brexit might have on the economy.
In its latest inflation report, the BoE states that a vote to leave the EU could “materially alter the outlook for output” and that “there are increasing signs that uncertainty associated with the EU referendum has begun to weigh on activity”.
However, Carney says he doesn’t expect to include any further warnings on Brexit in the next MPC meeting on 16 June.
He says: “We, in my judgment, have highlighted the key economic issues, including short-term uncertainty and the potential change in the trade-off between output and inflation, so I would not expect something substantially different to be said.”
However, he did not rule out a change in thought among MPC members on the impact of a Brexit vote, saying “I would not exclude the possibility that there is some evolution of the committee’s thinking”.
“I’m one member of the committee, we’ll have a few more weeks of data, things will move around, there may be a judgment around that,” he adds.
The impact of the EU referendum continues to be seen in markets, with today seeing UK sterling rise 0.5 per cent against the dollar at $1.4532. The jump came after a poll from the Telegraph shows 55 per cent back “remain”, while 42 per cent back leaving the EU.
The poll shows older voters, conservative supporters and men now support the remain campaign for the UK to stay in the EU.
The BoE already said sterling could “perhaps sharply” fall in the event of Brexit.
Since the start of 2016, major banks, including Goldman Sachs and other institutions, have estimated sterling could drop 20 per cent if the UK leaves the EU.
Scottish Friendly savings expert Calum Bennie says Carney’s “grilling” by the TSC is another clear sign Brexit will have a big impact on the UK economy.
Bennie says:“The build-up to the EU referendum appears to be having a significant impact on the economy as sterling has been incredibly volatile, while GDP and inflation have slowed are slowing.
“Carney didn’t exactly offer savers much ground for optimism today as he merely said the next move in interest rates would ‘probably’ be up if there is a vote to remain, while a Brexit would mean there is less chance of a rate rise. Once again savers are left wondering how long rates will continue at rock bottom, potentially eroding the value of their cash.”