Bank of England Governor Mark Carney on Tuesday defended the central bank's decision to flag the risks of leaving the European Union. Carney said the outcome of the June 23 referendum could require the Bank to make a big reassessment to how it sets interest rates, something it needed to explain to businesses and households. The BoE has angered campaigners who want Britain to leave the EU by talking of the risk of a sharp slowdown in economic growth and a rise in inflation. Carney said earlier this month there was a risk of a two-quarter recession.

"The United Kingdom to its great credit has been committed to free floating of the currency, and you would not expect the Bank to stand in the way of necessary adjustment in the exchange rate, and it would be inconsistent as well to use the exchange rate for competitive purposes or other reasons that would be inconsistent with our G7 commitments." "We as an institution will take all necessary steps to ensure that markets are orderly and the principal steps that we expect to take in that regard we have already announced, which are the liquidity facilities I think we discussed last time we were here," said Mark Carney, Governor Bank of England.

"We in my judgement have highlighted the key economic issues around, including short-term uncertainty and this potential change in the trade-off between output and inflation, so I would not expect something substantially different to be said," he said.