Bank of England Forecasts Pound Sterling Uncertainty Ahead of UK Referendum

Modified: Thursday, 21 April 2016 17:00 BST - Written by John Cameron

STORY LINK Bank of England Forecasts Pound Sterling Uncertainty Ahead of UK Referendum

BoE Governor Mark Carney has recently defended his stance on a 'Brexit', stating that it is his 'duty' to give an honest account on what the outcomes of the UK Referendum vote could have on the national economy.

BoE Governor Mark Carney Spoke before a House of Lords Committee Today

The Bank of England (BoE) has ostensibly been an independent organisation since an act of government passed by the newly elected Blair administration in 1997. However, this does not stop politicians summoning leading BoE policymakers for grillings at Westminster with some regularity.

This morning’s session was marked by one such appearance, this time from the BoE’s present Governor Mark Carney before a House of Lords committee. The attendant Lords were particularly interested in Carney’s forecast for the potential effects of a vote to ‘leave’ the European Union by UK voters in the 23rd June In / Out Referendum.

Carney Warns of Uncertainty ahead of the European Union Referendum

Carney stated that his Bank’s analysts were already noticing, ‘signs of growing uncertainty about the UK's macroeconomic outlook related to the referendum’, causing some economists to predict that UK Q2 Gross Domestic Product data, due out in July, may miss to the downside. The BoE Chief went on to assess the present state of the UK’s massive current account deficit, noting that,

‘it's safe to say that it is running at a rate around 5%... and that is remarkably high for a large advanced economy... The risk around the challenge is that the financing terms change on that current account. Increased cost to the economy - a consequence of that is a sharp slowing of the economy.’

Carney’s main message though was a warning on the negative effect of a ‘Brexit’ vote on 23rd June. Carney noted that such an outcome, ‘might result in an extended period of uncertainty about the economic outlook.’

Carney’s suggestion that the value of the Pound Sterling (currency : GBP) has already been adversely effected by the uncertainty engendered by the upcoming vote. Most analysts forecast that there will be further losses to come for the UK unit should voters opt for a ‘Brexit’. Leading investment bank Goldman Sachs forecast earlier this year that ‘Brexit’ would see Sterling lose 20% of its value – the outlook for the Pound is therefore neutral to negative.

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TAGS: Pound Sterling Forecasts