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Bank says referendum risk now 'global' Brexit poses global financial risk, Bank of England warns
(35 minutes later)
The Bank of England has held interest rates at historic lows of 0.5%, saying that uncertainty about the referendum outcome continues to be the "largest immediate risk" facing global financial markets. The Bank of England has warned that uncertainty about the EU referendum continues to be the "largest immediate risk" facing global financial markets.
"Through financial markets and confidence channels, there are risks of adverse spill-overs to the global economy," the Bank said of the possibility of a vote to leave the EU on June 23. The Bank said there were "risks of adverse spill-overs to the global economy" from the 23 June vote.
It said that there was growing evidence that businesses and consumers were putting off "major economic decisions" in the UK ahead of the referendum. It was "increasingly likely" that sterling would fall further in the event of a vote to leave the EU, perhaps sharply, the Bank added.
In the minutes of the Monetary Policy Committee, the Bank said that commercial and residential real estate purchases, car purchases and business investments had been postponed. Interest rates were held at the historic low of 0.5% for another month.
It said there was growing evidence that UK businesses and consumers were putting off "major economic decisions" ahead of the referendum.
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The Monetary Policy Committee minutes said that commercial and residential real estate purchases, car purchases and business investments had been postponed.
"An increasing range of financial asset prices has become more sensitive to market perceptions of the likely outcome of the forthcoming EU referendum," the Bank said, pointing out that its "measure of uncertainty" had risen."An increasing range of financial asset prices has become more sensitive to market perceptions of the likely outcome of the forthcoming EU referendum," the Bank said, pointing out that its "measure of uncertainty" had risen.
The value of sterling had also become more volatile, with volatility indexes rising to levels not seen since October 2008 and the financial crisis.
The Bank repeated its warning in the May MPC minutes, saying that a "vote to leave the EU could materially alter the outlook for [economic] output and inflation".The Bank repeated its warning in the May MPC minutes, saying that a "vote to leave the EU could materially alter the outlook for [economic] output and inflation".
It said it had contingency measures in place to deal with any fall-out from the referendum result, including more intense supervision of banks, the offer of more support to financial institutions should they need it and partnerships with other central banks to maintain financial stability.It said it had contingency measures in place to deal with any fall-out from the referendum result, including more intense supervision of banks, the offer of more support to financial institutions should they need it and partnerships with other central banks to maintain financial stability.
Analysis: Kamal Ahmed, economics editor
Anyone thinking that the Bank of England might tone down its warnings on the economic risks of the UK leaving the EU will have been disappointed by today's minutes from the MPC.
In paragraph after paragraph, the Bank says "uncertainty" over the referendum is weighing on the economy.
It also extends its concerns to global markets - a clear strengthening of its position since the minutes from last month, echoing concerns about "consequences" raised by Janet Yellen, the US Federal Reserve chair.
The Bank also says that sterling volatility has increased.
There is some better news, however. The Bank does say global growth has slightly improved and that in the UK there has been strong retail sales growth and a "sizeable jump" in industrial production and construction output.
But the overall tone is clear - the biggest risk to the UK economy is still the outcome of the referendum on 23 June.