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Bank of England warns Brexit could see pound plummet

Published 16/06/2016

A Brexit vote is likely to send the pound plummeting as pre-poll jitters are already hitting the housing market, the Bank of England has warned.

The intervention came as the Bank's governor Mark Carney insisted he has every right to comment on the economic impact of withdrawal after being accused of breaking impartiality rules by a leading Leave campaigner.

The Bank insisted it is "increasingly probable" a Leave vote in next week's referendum would sharply damage the value of Sterling across international money markets.

Financial experts warned uncertainty surrounding the outcome of the poll is already forcing consumers to put off "major economic decisions" and provoking a slowdown in house and car sales.

The Bank insisted the referendum remains the "largest immediate risk" facing financial markets, as its Monetary Policy Committee decided to hold rates at the 0.5% level they have been at since March 2009.

The latest foray into the increasingly bitter referendum debate came after an angry war of words exploded between Mr Carney and prominent Tory MP and Leave campaigner Bernard Jenkin.

Bank sources revealed Mr Carney considers a letter from Mr Jenkin stating that the governor had made his views on the referendum public despite strict impartiality rules to be a "political threat".

Commons Public Administration Committee chairman Mr Jenkin hit back by branding the governor "very aggressive".

In a strident response, Mr Carney said Mr Jenkin's letter contained "numerous and substantial misconceptions".

Mr Carney also accused Mr Jenkin of having a "fundamental misunderstanding" about the independence of the Bank.

The governor wrote: "All of the public comments that I, and other Bank officials, have made regarding issues related to the referendum have been limited to factors that affect the Bank's statutory responsibilities and have been entirely consistent with our remits."

Mr Jenkin said Mr Carney's intervention in the referendum debate has gone "way beyond what a Bank governor would normally do in terms of making statements about rate setting and economic forecasts".

He told BBC Radio 4's Today show: "He's reacted very, very aggressive towards me.

"There is no doubt that the appearance he made on the Andrew Marr programme went way beyond what a Bank governor would normally do in terms of making statements about rate setting and economic forecasts.

"I obviously misconstrued that because in my letter to him I said he had made his views clear that he wants the United Kingdom to stay in the European Union."

Lord Darling, Labour ex-chancellor, accused Mr Jenkin of engaging in a " blatant attempt to muzzle a respected independent voice".

Labour leader Jeremy Corbyn suggested supporters of his party may be backing the Brexit option because they do not understand what Leave would mean.

"I think a lot of people haven't understood the relationship with the European Union, haven't appreciated the amount of investment that's come in to many parts of this country," he said.

"I think that many people don't realise that the implications of voting to leave on the 23rd could be quite serious - could be quite serious in export industries that rely on selling goods across Europe."

Despite growing calls in Labour's top team for reform of free movement of workers' rules, Mr Corbyn insisted: "The European Union actually depends on the movement of people across the continent."

European Commission president Jean-Claude Juncker has warned UK voters "would be best advised" to oppose Brexit.

Speaking in St Petersburg, Russia, he said withdrawal would spark "a period of major uncertainty" for both Britain and the EU.

Boris Johnson, speaking before campaigning was suspended in light of the shooting and stabbing of Labour MP Jo Cox in her constituency near Leeds, warned against "talking this country down".

The pro-Brexit Conservative MP said: " The pound is roughly where it has been. I think it is no lower today than it has been in the last few months.

"I seem to remember the pound fell sharply on the day I said I was going to support the Leave campaign but we have just seen record employment figures, British exports are doing well.

"I think we shouldn't be talking this country down. It's a great country and a great economy. I think it will flourish outside the EU."

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