Fed's Kaplan Says Brexit Uncertainty Clouds June Rate Decision

Fed's Kaplan: Brexit to Factor in June Rate Decision

Federal Reserve Bank of Dallas President Robert Kaplan said he’ll move closer to advocating for an interest-rate increase at the next policy meeting if economic data improves, as he suspects it will, with one caveat: Brexit.

“It’ll be a factor,” Kaplan said Friday about the U.K.’s approaching vote on whether to exit the European Union. If the result is uncertain heading into the June 23 referendum, that could roil currency and bond markets and “create some instability,” he said in an interview on Bloomberg Television in London. Policy makers hold their next meeting on June 14-15.

“I’m going to have to make an assessment on June 15th what the likelihood is,” said Kaplan, who doesn’t vote this year on the policy-setting Federal Open Market Committee. “Right now it’s unclear, and if it’s still unclear on June 15 it is going to be a factor.”

The latest polls show the British public split over future EU membership, with 40 percent in favor of leaving the union, 43 percent advocating staying and 17 percent undecided.

Fed officials left their benchmark interest rate unchanged on Wednesday and gave a mildly upbeat assessment of the economy, leaving open the possibility of a rate increase in June.

Kaplan, citing continued strength in the U.S. labor market, said he expects the economy to rebound from a weak first quarter, when growth slowed to an annualized rate of 0.5 percent, according to a preliminary reading of gross domestic product published Thursday.

“We need to reconcile the GDP data with job data,” he said. “We’re not going to get GDP data by the time of the next meeting, but we will have consumer-price information and other information,” he said. If that data improves, “I’ll be advocating that we take some movement in the not too distant future.”

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