The majority view however is that the Fed will be loath to act too soon, and particular reluctant to do anything that has not been clearly signalled well in advance, so will choose to sit on its hands once more.
A surprise is unlikely but should not be ruled out.
“The Federal Reserve is unlikely to announce a change in its target Fed Funds rate at the conclusion of this week’s Federal Open Market Committee meeting,” said Larry Hatheway, chief economist at GAM. “A hallmark of the Yellen Fed, and its predecessors, is clear communication regarding policy decisions, avoiding surprises. Given the uncertainties the Fed had cited around ‘Brexit’ as well as the weakness of the May employment report, the Fed is widely believed to be ‘on hold’, a view it will almost certainly confirm this week.”
“That said, the FOMC statement is also likely to recognise that the much discussed concerns for capital markets, the world economy and – by extension – the US economy stemming from the UK ‘Leave’ result have not, for the most part, manifested themselves,” Hathaway continued. “Without saying so directly, the Fed is likely to conclude that the primary economic consequences of ‘Brexit’ will be felt in the UK, with little impact on US economic conditions.”
