Fed’s Lockhart: Brexit, uncertainty, require patience on rates

The U.S. economy shouldn’t sustain much damage from the Brexit vote and may warrant as many as two interest-rate increases before the end of the year, said Federal Reserve Bank of Philadelphia President Patrick Harker, Bloomberg reported.

Speaking in St. Louis on Friday, Bullard reiterated his view that the Fed should raise rates once more and then leave them unchanged for the foreseeable future because there’s “no reason to think” the USA economy will break out of its low-growth rut. “Of course it will depend on the economy”, he told reporters following an address at the Global Interdependence Center’s Rocky Mountain Economic Summit.

In a speech, Lockhart said it was clear to him that the United Kingdom’s decision to leave the European Union was not a “Lehman moment” of systemic importance to the global economy.

“In a post-Brexit survey a few days ago, roughly one-third of the businesses we surveyed indicated that the result of the referendum made their sales outlook more uncertain”, he said. Policymakers say it may take years to understand the fallout from Brexit.

“Lockhart reinforced the Fed can remain quite patient”, Guatieri said.

Fed Chair Janet Yellen has not publicly weighed in on the debate and has no appearances scheduled between now and the July 26-27 meeting of the Federal Open Market Committee, which will not be followed by a press conference.

Minneapolis Fed President Neel Kashkari: The Fed should “take our time” when it comes to raising rates.

And even Lockhart, a non-voter this year at the Fed, on Thursday said it was possible the Fed could raise rates once, or even twice, this year, if data allowed it.

The regulator reviewed growth developments across twelve districts, showing the economic expansion seems to be caught up around the annualized 2 percent figure, well below the historic average of 3.3 percent, while underlying inflation is insufficient to support the view that consumption will gain momentum in the near term.

Policy makers held the target range for the benchmark federal funds rate unchanged at 0.25 percent to 0.5 percent at their meeting in June to wait for more information on the health of the USA labor market following a weak reading for May, and to assess Brexit.

It was also too early to sound the all clear on financial-market stability according to Lockhart, although there was no evidence so far of any serious damage. “Elevated and protracted uncertainty will not help growth prospects of an economy constrained by low business fixed investment.Uncertainty that reduces business fixed investment activity is not helpful”.