The United Kingdom’s decision on whether or not to leave theEuropean Union (Brexit) weighed on the Federal Reserve’s decisionto raise interest rates.
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Fed chair Janet Yellen told reporters Wednesday the Brexit voteon June 23 was a factor in the bank’s decision on monetary policy.“It was fair to say it was one of the factors that factored intotoday’s decision,” said Yellen.”It is a decision that could haveconsequences for economic and financial conditions in globalfinancial markets.”
She added that Brexit “could have consequences in turn for theUS economic outlook.” A string of opinion polls show leads for the“Leave” campaign ranging from 1 to 10 percentage points.(RELATED: Pro-Brexit Campaign Storms Ahead InShock New Poll)
Markets are increasingly volatile as the Brexit vote draws near,with some investors fearful of the uncertainty a leave vote couldproduce in financial markets.
Politicians eager to keep the U.K. in the EU are ramping up therhetoric with the European Council President Donald Tusk claimingBrexit would destroy Western political civilization.
“Why is it so dangerous? Because no one can foresee what thelong-term consequences would be,” Tusk said Monday. “As a historian, I fearthat Brexit could be the beginning of the destruction of not onlythe EU but also of western political civilization in itsentirety.”
But not everyone is as pessimistic as Tusk. According to NobelPrize winning economist Paul Krugman, a vote for Brexit is highlyunlikely to result in financial crisis and could actually have somebenefits.
Krugman is reluctantly supporting a remain vote, and wrotein his New York Times column the scare stories over Brexit aregreatly exaggerated. (RELATED: Nobel Prize Winning Economist:Ignore Claims Of Crisis In Event Of Brexit)
“I would greatly discount claims about dramatic financial crisisor whatever. Maybe the pound would fall – but for a country thatborrows in its own currency and has an excessive current accountdeficit, that’s a good thing,” said Krugman.
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