Yellen and Draghi warn of 'significant' Brexit repercussions

A Brexit result would be likely to push global growth below 3pc, the bank\'s analysts said.

Published: 22nd June 2016 08:31 AM  |   Last Updated: 22nd June 2016 08:31 AM   |  A+A-


A Vote Leave campaign bus is driven past Remain campaigners hanging a large banner from Werstminster Bridge as they try to disrupt a flotilla of fishing vessels campaigning to leave the European Union as it sails up to Parliament on the river Thames in Lo

LONDON: The two most powerful people in central banking have given their strongest warning yet on the impact of a Brexit vote, as leading Wall Street bank Morgan Stanley warned that a British decision to leave could push the world towards recession.

Janet Yellen, chairman of the US Federal Reserve, and Mario Draghi, the European Central Bank president, warned that Brexit could have deleterious effects for the global economy.

Ahead of tomorrow's (Thursday's) landmark referendum, Ms Yellen warned that a withdrawal from the EU "could have significant economic repercussions", during testimony in front of the US Senate banking committee.

She cautioned that Brexit "could usher in a period of uncertainty", and potentially a period of market volatility that could worsen financial conditions in the US and added that there was a risk of flight by money managers into the perceived safety of US assets, driving up the dollar's value.

Separately, Mr Draghi warned that it was "very difficult to foresee the impact and various dimensions of how the vote in the UK will impact markets and the economies of the eurozone".

The Italian said that "it would be difficult to speculate about one outcome, we're trying to be ready to cope with all possible contingencies". He insisted that the central bank had "done all the preparation that is necessary" and explained it had made plans to stabilise jittery markets, if the need arose.

Ms Yellen admitted that the fallout after a Brexit vote was "by no means certain" and a US recession sparked by Brexit is "not the most likely case".

It came as Morgan Stanley economists told clients to prepare for the possibility of a global recession if the UK votes to leave the EU behind.

A Brexit result would be likely to push global growth below 3pc, the bank's analysts said, pushing the world "into the danger zone for a global recession", on Morgan Stanley's definition of GDP growth below 2.5pc. The Wall Street bank said "a vote to leave could cause protracted political uncertainty in Europe, creating negative spillovers for the rest of the world".

The warnings echoed that of Nouriel Roubini, the economist known as "Dr Doom" who predicted the US financial crash of 2007/8. Earlier in the day he said that Brexit could tip the UK economy into a recession. Mr Roubini's comments were countered by the Vote Leave campaign, with a spokesman saying: "The British public have had enough of this incessant scaremongering from people who have a vested interest in keeping the UK in the EU."

Meanwhile, it emerged Jaguar Land Rover's profits could take a pounds 1bn a year hit if Britain votes to leave the EU. The car company is understood to have conducted an internal analysis of the likely impact of a Leave vote.

JLR produces over 500,000 vehicles a year - almost a third of the UK's annual car output - and is likely to suffer through higher trade tariffs as import and export deals agreed through the EU unwind.

The variety of comments, and a new poll showing the referendum remains almost neck and neck, led the FTSE to modest gains, closing up 22.55 points, or 0.36pc, to 6,226.55 as investors turned cautious.

Stay up to date on all the latest World news with The New Indian Express App. Download now


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp