Federal Reserve on Brexit

From the Federal Reserve:

The Federal Reserve is carefully monitoring developments in global financial markets, in cooperation with other central banks, following the results of the U.K. referendum on membership in the European Union. The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.

The magnitude of the economic impact on the U.S. of Brexit is unclear, but it probably means the Fed will wait longer to raise rates (maybe December, maybe 2017). Here is an except from a Merrill Lynch note this morning on the impact:

1. Reducing real GDP growth by an average of 0.2pp over the next 6 quarters. This leaves 2016 annual growth of 1.8% but slices 0.2pp from growth next year, bringing it also to 1.8%

2.Fed will delay rate hikes. We expect the Fed to wait until December to hike ...

from
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