Minutes of the US Fed meeting, held the week before the referendum and released yesterday, indicated voting members of the rate setting Federal Open Market Committee were uneasy about the Brexit vote.
“Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on the consequences of the U.K. vote,” the minutes said.
While views might change even further with the release of US jobs figures at the end of this week, the central bankers were also expressing concern about Brexit, China’s high debt levels and currency policy, saying they “represented appreciable risks to global financial stability and economic performance.”
The minutes show there was a lot of debate about low inflation in the United States.
While “most” saw “continued progress” towards a workable inflation number, others were “less confident” citing “persistent disinflationary pressures,” ranging from weak growth abroad to low inflation expectations.
There was also disagreement about the paltry 38,000 created in May. Some Fed officials attributed that to a telecommunications strike and statistical noise. Others felt it could “be indicative of a broader slowdown in growth of economic activity.”
“It will probably take some time for the Fed to get a full accounting on the outlook for growth, which will mean that any move on rates will be another three to four months away at least,” Millan Mulraine, deputy head of US research and strategy at TD Securities (USA) LLC in New York told Bloomberg.
In the meantime, the market has priced in only a 12 per cent probability that the Fed will raise rates before the end of the year.