LONDON (AA) – Britain’s exit from the European Union could “materially” alter its prospects for growth and reducing unemployment, the country’s central bank warned Thursday.
In its most stark intervention yet in the EU membership referendum campaign, the Bank of England’s Monetary Policy Committee – which sets interest rates – warned consumer demand and the pound sterling would be affected by Brexit.
“A vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy,” the committee said in a statement.
“Households could defer consumption and firms delay investment, lowering labor demand and causing unemployment to rise. At the same time, supply growth is likely to be lower over the forecast period, reflecting slower capital accumulation and the need to reallocate resources.”
“Sterling is also likely to depreciate further, perhaps sharply. This combination of influences on demand, supply and the exchange rate could lead to a materially lower path for growth and a notably higher path for inflation,” the statement added.
The committee, which meets once a month to set interest rates, agreed to hold Britain’s benchmark interest rate at a record low of 0.5 percent, where it has been for more than seven years.
