(Bloomberg) -- Then-Bank of England Governor Mark Carney advocated lowering interest rates to near zero to counter the economic shock of Brexit before relenting to maintain consensus among policymakers, according to newly released transcripts.
The BOE minutes from 2016 — released on Thursday as part of a program to provide historical insight into policymakers’ thinking — showed the central bank governor pressing for the most robust response possible after Britons voted to leave the European Union. Members of the Monetary Policy Committee reached for pop-culture references from The Shawshank Redemption to the Harry Potter books as they tried to process the decision that June.
At the time, Carney was criticized by “Leave” supporters for warning of the possibility of recession if the UK voted for Brexit, with Thursday’s transcripts revealing the extent of the Canadian’s concerns. Brexit backer Boris Johnson said in response to Carney’s pre-referendum warnings that “we shouldn’t be talking this country down.”
While the economy avoided an immediate recession in the aftermath of the vote, GDP growth slowed in the following years as politicians wrangled over the Brexit deal.
In one of the exchanges during the bank’s meeting in August, Carney sought to cut interest rates to 0.10% or 0.05% from 0.5% where they stood at the time. That’s as low as the bank thought it could take borrowing costs at the time, a level it didn’t actually reach until the the pandemic. He ultimately accepted a quarter-point cut to avoid a “much messier” split decision.
The minutes from the meeting showed division over how monetary policy should respond to the seismic vote with several committee members, including Carney, preferring stronger action. Facing the prospect of a 5-to-4 split on the committee, Carney compromised on his preference for a bigger salvo on rates as the MPC eventually backed a cut in bank rate to a then-record low of 0.25% and £70 billion of corporate and government debt purchases.
Afterward, Carney included wording in the decision that suggested the committee would later consider cutting rates to the floor. There were disagreements over the response, with Carney and rate-setter Martin Weale debating the message to investors that a split vote would send.
Carney is now the chair of Brookfield Asset Management Ltd. and Bloomberg Inc., among other roles. He was BOE Governor between 2013 and 2020, when he handed the reins to current governor, Andrew Bailey. Carney is currently a contender to succeed Justin Trudeau as leader of Canada’s ruling Liberal Party.
The historical transcripts make clear that BOE rate-setters saw the referendum decision as transformational to the UK’s economic outlook after the central bank was accused of being too gloomy on Brexit during the campaign.
During the July 2016 meeting — the first after the Brexit vote — external member Kristin Forbes presented fellow MPC members with a gold necklace with a spinning pendant, asking whether anyone knew what it was. Then-Deputy Governor Ben Broadbent correctly identified it as a replica of the “time-turner” device used by the Harry Potter character Hermione to travel into the past.
Forbes passed the necklace around the committee room. “Many people wish they had an operational form of this today – whether to go back to vote differently or to better plan for a ‘leave’” outcome, she said.
Policymakers also debated buying corporate bonds at the same meeting to support the economy after the referendum. Then-Chief Economist Andy Haldane criticized it as lacking in fire-power, equating it with “taking that miniature rock hammer to dig your way out of Shawshank prison,” referencing Andy Dufresne’s flight to freedom in the 1994 film.
“I know that Andy did eventually escape, but it did take him over 20 years,” Haldane said.
The 2016 minutes suggest BOE rate-setters started seeing Brexit as a bigger threat to the economy from March. That’s when Carney drew parallels with the Ides of March to outline the risks. Carney said that sterling’s dramatic depreciation since the start of the year was like Calpurnia’s dream which “foretold carnage” for Julius Caesar.
The policymakers described waking up to a different country and bemoaned their “limited” firepower as they considered how to react to the Brexit shock, minutes from a meeting just weeks after the June 23 vote showed.
“The past is another country and we are now in a rather different place, economically as well as politically,” Broadbent said.
©2025 Bloomberg L.P.