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Video Bank of England Mark Carney Governor quizzed on the risks of Brexit ,Sir Jon Cunliffe

Bank of England Governor Mark Carney backed a deal negotiated by Prime Minister David Cameron to change the country's relationship with the European Union ahead of a referendum in June, saying it allowed the central bank to do it job.

"The Settlement addresses the issues the Bank identified as being important, given the likely need for further integration of the euro area, to maintaining its ability to achieve its objectives," Carney said in a letter to British lawmakers.

Bank of England Governor Mark Carney said on Tuesday that he had not agreed in advance with Prime Minister David Cameron what stance he would take on Britain's membership of the European Union.

"I have not had conversations with the prime minister about what I might say about the European Union," Carney told MPs on Tuesday.

The governor of the Bank of England has said that the possibility of Britain leaving the EU is the "biggest domestic risk to financial stability".

In a hearing before the Treasury Committee, Mark Carney said that the economy would be affected by the uncertainty created by an exit vote.

Mr Carney emphasised that the Bank was not taking sides in the EU referendum.
However, Conservative MP Jacob Rees-Mogg accused him of making "pro-EU" comments.
In a letter [ below ]sent to Treasury Committee chairman Andrew Tyrie, Mr Carney said that Britain's membership of the EU had reinforced the "dynamism of the UK economy", and that the relationship had helped the UK to grow.

In a sometimes fractious exchange with MPs on the committee, Mr Carney denied claims he was "pro-EU".

Mr Rees-Mogg said his comments were "beneath the dignity of the Bank".


Mr Carney said risks from an EU exit included the Bank's ability to control inflation, a fall in the pound and banks moving abroad.

However, if Britain votes to leave the EU, Mr Carney said the Bank "will do everything in our power to discharge our responsibility to achieve monetary stability and financial stability".

He said that there were measures that the Bank of England could take in the short term to support the financial system but said he could not rule out the possibility that there could be issues with stability.
'Outside remit'

Commenting on the short-term impact of an EU exit, Mr Carney said: "There could be lower levels of activity because of the degree of uncertainty that could affect investment and household spending. Reasonable expectations during a period of uncertainty."

However, he said it would not be possible to say what the longer term impact of leaving the EU would be on Britain. "We are not forming a view because it's outside our remit," Mr Carney said.
Mr Carney was also questioned about the financial sector's reaction to an exit.

He said: "One would expect some activity to move, certainly there's a logic to that and there are views that have been expressed publicly and privately by a number of institutions that they would look at it, and I'd say a number of institutions are contingency planning for that possibility."

On Monday, the Bank of England pledged to offer extra funding to the financial market before and after the June vote, in case uncertainty put pressure on the banking system.

Carney said he had spoken with Cameron and Chancellor George Osborne about the government's negotiations with the EU that resulted in a deal designed to keep Britain inside the 28-nation bloc.

The bank’s economists reckon inflation is likely to rise even more slowly than they thought in August, reaching 2.06% two years from now – a smidgen (to use the technical term) above target.

And what does that mean for interest rates?

Here, you can set aside your magnifying glass: the Bank’s forecasts for inflation take into account investors’ current expectations that the first rates rise will happen in the first half of 2017.

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