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Fears of Brexit May Discourage Fed Rate Hike

Fears of Brexit May Discourage Fed Rate Hike

The US Federal Reserve is set to announce its decision on whether to raise interest rates at the end of June. Taking into account purely domestic conditions, the data is supportive of a second-quarter point increase. In April, the US witnessed its most significant increase in consumer spending in seven years and oil prices have been rising once again following the lowest fall in December last year.

Nonetheless, analysts expect that the Fed is more likely than not to hold back raising interest rates. While overseas events usually do not influence the Fed’s rate hike decisions, the British referendum is seen as potentially having a more than significant impact on global markets. A British exit is likely to encourage other Eurosceptics in other European countries and may see the beginning of the fractioning of the European Union. Such fears will send ripples across global markets and at the same time create global uncertainty in the short and medium term. Jerome Powell, a member of the Fed’s Board of Governors said last week that the issue of a Brexit was a “real consideration” for the Fed, suggesting that whether or not the Fed raises rates depends largely on sentiments surrounding Brexit.

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