San Francisco Fed President and CEO John Williams said on Tuesday he does not think it will have as much of an impact as some other economic developments in the last few years, but at the same time emphasized the uncertainty around the U.K.’s recent exit from the European Union, as far as the U.S. market.
In an interview with MarketWatch [1], Williams stated about Brexit, “I personally have a view that GDP growth for the year as a whole was going to be maybe a touch under 2 percent, maybe take a tenth of a percentage point off of that because of these effects from Brexit, financial conditions, trade, some of the uncertainty effects that you might expect.”
Williams continued, “So I think it does have an effect on the U.S. economic outlook, it is not nearly as big a deal as other developments that have happened over the last seven or eight years. I don’t think it is nearly as big a deal as the euro crisis from 2011-2012.”
The take on Brexit expressed by Williams seemed similar to views expressed by Fed Vice Chair Stanley Fischer, who said late last week in an interview that he was taking a “wait and see” approach with Brexit and that he believes the fallout from Brexit will have a much greater direct effect on the European market than it will on the U.S. market.
Williams pointed out that the stock market is “basically where it was a month ago or so,” and that mortgage rates (and Treasury and corporate bond rates) in the U.S. have come down following the Brexit vote—down near historic lows. Part of that, he said, is “an expectation around monetary policy but part of that is just people moving their money to safety.”
While Williams said the effect of Brexit on the U.S. market seems to be modest so far, at the same time, he was not ready to return to his may prediction that two or three rate hikes by the Fed would occur this year.
“Every (Federal Open Market Committee) meeting (every six weeks) we have that discussion and then we’ll make a decision and then we’ll get together six weeks later and have the discussion again,” Williams said. “And so, I don’t worry so much about whether we have one, two or three increases over a certain period of time, it is more that we’re moving gradually consistent with the economy toward removing policy accommodation.”