Despite facing criticism from “Out” campaigners, the governor of Britain’s central bank has justified stating the risks of such an outcome.
Mark Carney, the governor of the Bank of England has denied that by stating the possible short-run costs of leaving the European Union, he has compromised the central bank’s independence. His denial comes in the wake of criticism of “Out” campaigners.
In the previous week, the central bank’s governor had said that Britain risked slower growth rates, along with higher inflation and possibly even recession if its voters backed the move to leave the European Union in a referendum scheduled for June 23.
During a BBC television interview, Carney had said he had “absolutely not” overstepped his boundaries and that he could be failing his public duties if he did not flag the dangers of this outcome.
“We … have a responsibility to explain risks and then take steps, because by explaining them – by explaining what we would do to mitigate (them) – we reduce them. And that is the key point, ignoring a risk is not to reduce it,” said Carney.
Andreas Leadsom, an “Out” campaigner and a Conservative environment minister has told the BBC that the Bank of England’s analysis was one-sided and reflective of the view of only the elites, who were not hurt by immigration crisis.
“There is this big institutional ganging-up on the poor British voter,” said Leadsom.
Incidentally, international bodies such as the IMF, and Britain’s other main political parties support Britain’s stay within the EU. However, many conservative lawmakers want Britain to leave the EU, leaving public opinion open to debate.
Jacob Rees-Mogg, a conservative member who forms part of the parliamentary committee which scrutinises the BoE strategy, has reiterated the conservative point of view that having made the remarks, Carney was no longer suitable to head the central bank.
“He should be fired, absolutely. We now cannot trust the Governor of the Bank of England to set interest rates for anything other than the benefit of the government,” said Mogg to ITV.
Carney has defended his stating the warning saying it is the job of the Britain’s central bank to bring about financial stability, it is its job to steer the economy to a target of 2% inflation, it is his job to be frank impending short-term risks, and of Britain were to leave the European Union, achieving these goals could be challenging, to say the least.
Although it would be “highly, highly unlikely” that the central bank would cut interest rates to zero in case the economy were to suddenly put falter from its course, this is however an option his colleagues, in the Monetary Policy Committee, are open to.
However, if interest rates were to rise, he was confident that, unlike in the U.S., British households will be in a position to service to service their debts, albeit at a high cost to overall consumer demand.
Carney said, it is not yet clear whether the central bank would need to cut or raise interest rates, if Britain were to leave the European Union.
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