Federal Reserve vice chairman Stanley Fischer suggested Friday morning that the U.S. might be able to avoid severe fallout from the decision by British voters to leave the European Union.
“My guess is that it will be less important for the U.S. than for the countries directly involved,” Fischer said in an interview on CNBC. “And, we’ll wait and see.”
Fischer did not minimize the importance of the vote for the U.K. and EU economies, and said it “clearly is a huge event event” for them.
But he noted that the economic data for the U.S. has been “pretty good” since the disappointing jobs report for May, a factor that the Fed must also weigh when setting monetary policy.
If the Fed had met to discuss interest rates last week, with global markets in turmoil because of the Brexit vote, the Fed’s decision might be different. But the Fed won’t meet until the end of July, and markets have already stabilized from the initial reaction.
Further out on the horizon, Fischer noted, there could be economic repercussions from the U.K. negotiating new terms of trade, or from the political risks involved in other countries seeking to emulate the U.K. But those considerations are only one factor in the Fed’s thinking.
In the immediate wake of the referendum outcome, investors bet that the Fed would most likely not raise rates in 2016 at all, and that it might even lower rates back to zero in order to respond to the fallout.
Fischer downplayed that scenario, however, and said simply that “we’re watching closely and I think at the moment we’re preparing … for the end of July meeting, and we’ll see what has happened by then.”
The longtime monetary policy veteran, who previously led the Bank of Israel and had a private-sector and academic career before joining the Fed, also discussed the possibility that the upcoming U.S. elections could raise uncertainty in markets.
While the elections are a source of uncertainty, Fischer said, they are “not a source of additional uncertainty, if any, about monetary policy. We will do what we have to do in accordance with the law.”
