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Bank of England emphasises Brexit risks to global economy

The Bank of England said on Thursday a British vote next week to leave the European Union could harm the global economy, and warned it looked increasingly likely sterling would fall further after a Brexit vote.

The nine members of the Monetary Policy Committee were also briefed on the BoE's contingency plans around the referendum, including closer supervision of banks to make sure they have access to the liquidity they need.

Minutes from their June 15 meeting, where the committee decided to hold interest rates at 0.5 percent and make no changes to its quantitative easing program, emphasised that the referendum was the largest immediate risk facing British financial markets, but possibly also global markets too.

British sterling ten pound banknotes are seen in an automated teller machine (ATM) in this posed photograph taken outside a branch of the British bank Lloyds in London.
Niklas Halle'n | AFP | Getty Images
British sterling ten pound banknotes are seen in an automated teller machine (ATM) in this posed photograph taken outside a branch of the British bank Lloyds in London.

"Through financial market and confidence channels, there are also risks of adverse spill-overs to the global economy," the minutes said.

U.S. Federal Reserve Chair Janet Yellen on Wednesday acknowledged Britain's possible exit from the EU as one factor for keeping interest rates on hold this month and the Bank of Japan said the risk of Brexit is its biggest near-term concern.

BoE policymakers said it was "increasingly likely" that sterling would fall further after a vote to leave the EU, perhaps sharply.

Shifts in the pound's exchange rate around the publication of opinion polls had reinforced their view that a big part of sterling's weakness recently was down to uncertainty around the referendum.

However, it remained unclear how much of the slowdown in the economy was down to the referendum, the Bank said.


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