A vote to leave the EU could harm economic growth and have a serious impact on the pound and other UK assets, the Bank of England has said, as it took steps to prepare for June’s referendum.

Minutes to the Bank’s latest policy meeting showed its nine-strong monetary policy committee voted unanimously to leave interest rates at their historic low of 0.5%. The committee said uncertainty ahead of what was expected to be a close EU vote appeared to be weighing on investment decisions, and policymakers said economic growth could slow as a result in the second quarter of the year.

The minutes showed that as the 23 June vote nears, policymakers discussed the likely implications for monetary policy of a vote to leave the EU.

“Such a vote might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short term,” the minutes said.

“A vote to leave could have significant implications for asset prices, in particular the exchange rate. The MPC would have to make careful judgements about the next effects of these potential influences on demand, supply and inflation. Ultimately, monetary policy would be set in order to meet the inflation target, while also ensuring that inflation expectations remained anchored.”

A Reuters poll this week found that 17 of 26 economists thought a vote for Brexit could prompt the Bank to cut interest rates for the first time since the financial crisis.

The minutes continued: “Whatever the outcome of the referendum, the MPC would use its tools to achieve its inflation remit.”

The Bank highlighted signs that increased uncertainty might already be beginning to weigh on demand, among them reports of deferred investment decisions, delayed private equity deals and company flotations, and reports from lenders that demand for finance from large companies had dipped.

“Taken together, these developments highlighted the risk that the economy could slow somewhat in the second quarter,” the minutes said.

They also said it would be harder to read data over the coming months.

“Referendum effects are likely to make macroeconomic and financial market indicators harder to interpret over the next few months, and the committee is likely to react more cautiously to data news over this period than would normally be the case,” they said.

The Bank’s policymakers reiterated their previous message that when interest rates do start to rise they will do so “more gradually and to a lower level than in recent cycles”.

Surveys and official figures have pointed to a slowdown in the UK economy in recent months, with some companies saying they are delaying hiring and investment decisions until after the EU referendum.



The minutes follow a warning from the International Monetary Fund this week that a British vote to leave the EU risked doing damage to the whole region, spilling over into an already fragile global economy.

In its latest World Economic Outlook the IMF downgraded its growth forecast for the UK to 1.9% for 2016, compared with a forecast for 2.2% made in January.