A vote to leave the European Union could plunge the UK into recession, Mark Carney warned today.
The Bank of England governor said the the effects of Brexit "could possibly include a technical recession" as the Bank said a vote to Leave would lead to a "material" slowdown in growth, lead to higher unemployment and higher prices for UK consumers.
The BoE's intervention in the EU debate was seen as its most outspoken yet, as its quarterly inflation report and the latest minutes of the monetary policy committee (MPC) were peppered with references to referendum risks.
Facing accusations of political interference, Carney hit back hard, saying that it was the Bank of England's "responsibility to analyse these risks … This is the biggest risk [to the UK economy]".
"We have to communicate this," Carney added. "The political choice would be to suppress the analysis."
The governor also warned that sterling would fall "sharply" in the event of a vote to leave, but the Bank refused to say to what level it thought the pound would fall.
Since November 2015, the pound has dropped nine per cent – the Bank puts half the fall down to referendum jitters.
In response to the hard-hitting analysis that will be interpreted as a staunch case for Britain to stay in the EU, the pound climbed 0.2 per cent against the dollar to $1.4478 as markets believed intervention from the Old Lady could shore up support for a vote to Remain.
Yesterday in front of the Treasury Select Committee (TSC), George Osborne was accused of “over-egging” his claims that Brexit would cost each household the equivalent of £4,300 in lost GDP by fellow Conservative MP Andrew Tyrie.
He was also criticised by the think tank Open Europe for going “too far” when he said a vote to leave could also trigger a balance of payments crisis.