Janet Yellen Warns Brexit Vote Could Hit US Economy

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Guy Bentley Research Associate, Reason Foundation
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Federal Reserve chair Janet Yellen is warning the United Kingdom’s vote on whether to leave the European Union could have “significant economic repercussions.”

The U.K. will vote on Brexit for the first time in more than 40 years June 23. In a speech on the economy and monetary policy Monday, Yellen said the Brexit vote would weigh on the Federal Reserve’s decision on whether or not to raise interest rates.

“A UK vote to exit the European Union could have significant economic repercussions,” said Yellen. She added if the U.K. voted for Brexit it could affect market sentiment and investment.

The tenor of her comments on the U.S. economy is generally positive. “If incoming data are consistent with labour market conditions strengthening and inflation making progress toward our two percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate,” said Yellen. Her statements are being seen as a strong indication the Fed will raise interest rates over the summer.

The pound slipped against the dollar Monday after two polls showed the “Leave” campaign taking the lead. An ICM poll Monday showed the Brexit camp taking a five-point lead — the largest yet seen — while a YouGov survey put Brexit four points ahead of the “Remain” campaign, at 45 to 41 percent. (RELATED: UK Currency Sliding As Brexit Jumps Ahead In The Polls)

Not all investors fear a Brexit vote. Jim Mellon, one of the richest men in Britain, argues the United Kingdom would be economically safer and richer outside the EU. (VIDEO: Economist Who Predicted The Great Recession Backs Brexit)

Mellon intervened in the Brexit debate, forecasting the currency block is facing “years of turbulence” and the euro will break up at some point in the next three to five years.

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