Bank of England's Carney, under fresh fire, defends Brexit message

By David Milliken and Huw Jones LONDON (Reuters) - Bank of England Governor Mark Carney on Tuesday defended the central bank's decision to flag the risks of leaving the European Union, coming under renewed attack from a lawmaker who has been highly critical of his role in the Brexit debate. Carney said the Bank might have to make a big reassessment of its stance on interest rates if Britain votes to leave the EU in the referendum on June 23 - widely known as Brexit - and that was something it felt obliged to explain ahead of time to businesses and households. "It's important not just for those in financial markets to understand that, but it's important also to (be) straight with the British people about that," he told a parliamentary committee. 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 in the event of a vote for Brexit, as a British departure from the EU is known. Carney said earlier this month there was a risk of a two-quarter recession. Jacob Rees-Mogg, a eurosceptic lawmaker who has previously accused Carney of venturing into politics with his Brexit warnings and called on him to resign, kept up his criticism. Rees-Mogg accused Carney of "sophistry" for justifying the BoE's intervention while it had remained silent about what different national election results might mean for the economy in the past. The Conservative Party lawmaker also called the BoE a "creature of the government", prompting a visibly irritated Carney to say the BoE took no sides in the referendum debate. Prime Minister David Cameron and finance minister George Osborne are leading the campaign to keep the country in the EU. The finance ministry has issued similar warning to Carney. Andrew Tyrie, chairman of the committee quizzing Carney and other BoE officials on Tuesday, said lawmakers would have criticised the governor if he had stayed silent on Brexit. Carney said he did not expect the central bank to make substantial fresh comments about the risks of Britain leaving the EU before the referendum next month. The Bank is due to make a monthly policy statement on June 16, a week before the In-Out vote. In a separate hearing in parliament on Tuesday, members of the BoE's Financial Policy Committee, which oversees Britain's financial services industry, struck different tones on the scale of the risks posed by a British vote to leave the EU. Richard Sharp said the country would "remain a thoroughly investible economy whichever way the vote goes" and a fall in the value of sterling would help offset any short-term instability. But his fellow FPC member Donald Kohn said the uncertainty after a "Leave" vote would be "very, very substantial" and he was less relaxed at the prospect of Brexit than Sharp. (Additional reporting by Ana Nicolaci da Costa and Estelle Shirbon, writing by William Schomberg Editing by Jeremy Gaunt)