Bank of England Governor Mark Carney has been appearing before eurosceptic UK lawmakers, defending his view that Britain leaving the European Union could hit the country’s economy.
Carney said the BoE would not assess the long-term implications of the referendum for the economy. But a vote for Brexit would deliver a short-term hit to growth and the value of the pound, and foreign investment would probably also diminish.
On inflation – which is way below the Bank’s target – Carney said consumer prices could be affected in various ways: “There can be short term implications for activity in the United Kingdom and therefore more pressures on prices. There could be lower levels of activity because of the degree of uncertainty that could affect investment and household spending.”
On the other hand, he said, a weaker pound could push up prices and therefore inflation.
Asked about the implications of an exit for Britain’s huge banking industry, Carney said some big financial firms might move business out of Britain if the country did not secure the same kind of access it currently has to the EU. That kind of negotiation could take “a very long time”, he added.
Carney is trying to tread a fine line of giving the Bank’s opinion on what might happen but without being seen as backing one side or the other.
To that end, Carney said there were risks from remaining inside the EU due to the greater integration planned by the 19-member eurozone.
But he also praised a deal struck by British Prime Minister David Cameron last month that set out the terms of Britain’s membership of the EU, saying it would help the BoE do its job.
Supporters of Britain leaving the European Union have accused him of overstated the positives of staying in.
Jacob Rees-Mogg, a member of the ruling Conservative Party, said on Tuesday it was “beneath the dignity” of the BoE to make “speculative” comments about the benefits of EU membership and that Carney was damaging the BoE’s reputation.