LONDON (Alliance News) – Policymakers of the Bank of England unanimously decided to maintain the monetary policy as they keenly await the outcome of the referendum on EU membership, which will ultimately decides the future course of action.

The bank also warned on the risks from ‘Brexit’ and vowed to take whatever action needed following the referendum to bring inflation to the target over the appropriate horizon.

The Monetary Policy Committee, led by Governor Mark Carney, voted 9-0 to hold the interest rate at a record low 0.50%, the bank said in a statement on Thursday.

The rate has been at this low level for seven years. Policymakers also unanimously voted to maintain the quantitative easing at GBP 375 billion.

“The outcome of the referendum continues to be the largest immediate risk facing UK financial markets, and possibly also global financial markets,” it said.

The bank cautioned that a vote to leave the EU on June 23 could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy.

In the face of greater uncertainty about the UK’s trading arrangements, sterling was likely to depreciate further, perhaps sharply, the bank noted.

Rising uncertainty about the referendum is leading to delays to major economic decisions. As previously noted, potential referendum effects are making economic data releases more difficult to interpret, and the MPC is being more cautious in drawing inferences from them than would normally be the case.

According to a reply to Leave campaigner Bernard Jenkin MP, published by BoE today, Carney said Jenkin’s letter demonstrates a fundamental misunderstanding of central bank independence.

Jenkin earlier criticized Carney for his public remark on the referendum.

The bank has been given, by Parliament, operational independence to pursue monetary and financial stability, within clearly defined frameworks, Carney said. The bank has a duty to report evidence-based judgments to Parliament and the public.

In the case of Brexit, James Knightley at ING Bank NV said the focus will be on the growth risks and financial market turbulence, which would dampen domestic inflation pressures over the medium term.

Copyright RTT News/dpa-AFX

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