On June 28, 2016, US Federal Reserve Board Governor Jerome Powell delivered remarks to the Chicago Council on Global Affairs, highlighting the impact of Brexit on the outlook for the US economy.
Governor Powell voiced concern that the Brexit vote has the potential to create new headwinds for economies around the world, including the United States. He noted that while it may be “far too early to judge the effects of the Brexit vote,” it will be important to assess implications for the US economy, and for the stance of policy to foster continued progress towards the objectives of maximum employment and price stability in the United States.
Governor Powell noted that for some time, the principal risks to the US labor market recovery and economic growth have been from abroad. Due to the high and continuously appreciating trade-weighted value of the US dollar, the economy inevitably “imports” trading partners’ weak economic performances and financial volatility. Powell stated that to successfully contain the impact of the British referendum, the Federal Reserve Board is “prepared to provide dollar liquidity through existing swap lines” with central banks to address pressures in global funding markets. Powell also noted that while financial conditions have “tightened” since the Brexit vote, markets have continued to function in an “orderly” manner and the US financial markets remain resilient.
Governor Powell’s speech is available at: http://www.federalreserve.gov/newsevents/speech/powell20160628a.pdf.