15  Copies of the minutes are available at: http://www.bankofengland.co.uk/publications/minutes/Pages/mpc/default.aspx  BIS central bankers’ speeches  11  As required by its remit, the MPC has already described how a vote to leave the EU could materially alter the outlook for growth and inflation. As a result of increased uncertainty and tighter financial conditions, UK households could defer consumption and firms delay investment, lowering labour demand and causing unemployment to rise. Through financial market and confidence channels, there are also risks of adverse spillovers to the global economy. At the same time, supply growth is likely to be lower over the next three years, reflecting slower capital accumulation and the need to reallocate resources across sectors of the economy. Both of these forces may be exacerbated by higher uncertainty and tighter financial conditions. Finally, as expected, sterling has depreciated sharply. For given foreign demand, this will mean support to net trade, though this may well be dampened by uncertainty around future trading relationships. A lower exchange rate will also entail higher prices for imported consumer goods, energy and capital goods, and consequently lower real incomes. As the MPC said prior to the referendum, the combination of these influences on demand, supply and the exchange rate could lead to a materially lower path for growth and a notably higher path for inflation than set out in the May Inflation Report. In such circumstances, the MPC will face a trade-off between stabilising inflation on the one hand and avoiding undue volatility in output and employment on the other.
As a further precaution, reflecting the possibility that heightened uncertainty may last a while longer, today the Bank of England is announcing that it will continue to offer Indexed LongTerm Repo operations on a weekly basis until end-September 2016. This will provide additional flexibility in the Bank’s provision of liquidity insurance over the coming months. These facilities provide an effective way for banks to manage their liquidity, with a competitive auction process, designed to encourage usage, but where at times some bids will go unfilled. We expect institutions to draw on this funding if and when appropriate, just as we expect them to draw on their own resources as needed in order to provide credit, support markets, and generally supply financial services to the real economy. In order to have confidence and plan for the future, financial institutions, like the rest of us, desire certainty. That is why the Bank will continue to be very clear about their regulatory framework. Our liquidity framework is now established and effective. Over the past year, the FPC has finalised the overall capital framework. We are steadily implementing measures to develop ring-fenced banks and to end the scourge of too-big-to-fail. Nothing in financial regulation has changed as a result of last week’s referendum. It will not change until the process of the UK’s withdrawal from the European Union is complete, until the UK is no longer a member of the EU and until EU law ceases to have effect in the UK. The law is the law. Rules are rules.