Brexit helped keep Fed on hold, could slow future U.S. rate rises

Wed Jun 15, 2016 8:59pm EDT
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By Ann Saphir

(Reuters) - Federal Reserve Chair Janet Yellen left U.S. interest rates unchanged on Wednesday, citing slow jobs gains, tepid growth and low inflation - and an impending vote in Britain on whether to quit the European Union.

"I think it’s fair to say that it was one of the factors that factored into today’s decisions," Yellen said of the "Brexit" vote next week. "Obviously how that turns out is something that will factor into future decisions."

It was not the first time global issues have played into Fed decisions on domestic monetary policy. Last fall the U.S. central bank deferred an expected rate rise after global markets swooned in response to an unanticipated slowdown in China's economy.

Britain's exit from the 28-member EU would add more uncertainty for Yellen's Fed as it seeks to re-establish its rate-setting credibility in the face of skeptical markets which have now all but priced out a rate rise by the U.S. central bank this year.

But beyond noting a Brexit could have "consequences for economic and financial conditions in global financial markets" that could in turn affect the U.S. economic outlook and the appropriate path of U.S. policy, Yellen gave few specifics on how she saw a UK departure from the bloc playing out.

Economists fear a "leave" vote could unleash turmoil on global financial markets. Traders in London are readying for all-nighters after polls close late on June 23.

Global exchanges say they will be on the lookout for disruptions.

The European Central Bank is prepared to pledge to backstop financial markets alongside the Bank of England.   Continued...

A car sticker with a logo encouraging people to leave the EU is seen on a car, in Llandudno, Wales, February 27, 2016. REUTERS/Phil Noble/Files