The U.S. Federal Reserve is expected to stay on hold during the next week, while the Federal Open Market Committee evaluates interest rates on Monday, amid worries regarding the economy of the country. The meeting occurs in a context where global economy may be affected by the Chinese economy and the possible exit of Britain from the European Union (EU).
The Federal Reserve System, better known as “The Fed”, increased the rate of its policy interests last December, for the first time in ten years. Analysts suggest that officials in charge are deciding whether to raise rates again or wait, said Reuters.
The policy committee of The Fed (FOMC) is going to meet on Monday and Tuesday, for the third time in 2016. Economists at Reuters also explained that that the institution would wait to obtain further data about higher inflation and growth, before continuing the project of maintaining “more normal levels” of interest rates.
A theory proposes that Fed Chair Janet Yellen will be prudent about future rate hikes, before the second half of 2016. The country is generating jobs while consumer prices have increased, which serves to support a rise of the Fed interest.
On the other hand, retail sales, international trade, China’s economy and the possible exit of Britain from the EU are being taken into account, said Reuters. The latter calculates that Americans will see two rate hikes within this year, according to polling of market participants.
“I don’t think they can pull off a June hike without triggering another round of volatility, and they don’t want that because the selloff in January and February left a deep scar. The FOMC can’t go too hawkish overnight because markets aren’t pricing in anything close to that.” Aneta Markowska, chief U.S. economist at Societe Generale, said in New York to Reuters.
What means the Brexit and its possible impact on the U.S. economy
Britain is going to carry out a referendum on Thursday, June 23, to determine if it remains or not as a member of the European Union. Brexit is a word created by the combination of “British” and “exit”. Last Friday, president Barack Obama traveled to London to tell voters his opinion.
He said the U.K. should stay in the 28-member bloc in order to “help Europe take a strong stance in the world”. Analysts suggest that a British departure could inevitably untie global economic consequences, since the country would no longer need to contribute to the EU budget, explained Express.
American companies can operate in the European Union if they set a subsidiary in any of the 28 member countries. At the same time, 30 percent of sales made in the continent by U.S. companies, are registered just in the U.K.
Britain can allow financial firms, to operate across other countries of the EU. As a result, American banks use London as a link to reach other businesses in the continent.
If a Brexit takes place, U.S. banks would be obligated to set new bases in other countries of the E.U in order to continue offering services in the region, without passing through many regulations that differ in every country.
“Banks based in London can sell their services across Europe without needing multiple regulatory approvals While Britain will remain an attractive center for finance even if Britain exits, it should not take for granted its global primacy when it is no longer the gateway to Europe,” the former Treasury officials said, according to CNN.