The United Kingdom’s decision on whether or not to leave the European Union (Brexit) weighed on the Federal Reserve’s decision to raise interest rates.
Fed chair Janet Yellen told reporters Wednesday the Brexit vote on June 23 was a factor in the bank’s decision on monetary policy. “It was fair to say it was one of the factors that factored into today’s decision,” said Yellen.”It is a decision that could have consequences for economic and financial conditions in global financial markets.”
She added that Brexit “could have consequences in turn for the US economic outlook.” A string of opinion polls show leads for the “Leave” campaign ranging from 1 to 10 percentage points. (RELATED: Pro-Brexit Campaign Storms Ahead In Shock New Poll)
Markets are increasingly volatile as the Brexit vote draws near, with some investors fearful of the uncertainty a leave vote could produce in financial markets.
Politicians eager to keep the U.K. in the EU are ramping up the rhetoric with the European Council President Donald Tusk claiming Brexit would destroy Western political civilization.
“Why is it so dangerous? Because no one can foresee what the long-term consequences would be,” Tusk said Monday. “As a historian, I fear that Brexit could be the beginning of the destruction of not only the EU but also of western political civilization in its entirety.”
But not everyone is as pessimistic as Tusk. According to Nobel Prize winning economist Paul Krugman, a vote for Brexit is highly unlikely to result in financial crisis and could actually have some benefits.
Krugman is reluctantly supporting a remain vote, and wrote in his New York Times column the scare stories over Brexit are greatly exaggerated. (RELATED: Nobel Prize Winning Economist: Ignore Claims Of Crisis In Event Of Brexit)
“I would greatly discount claims about dramatic financial crisis or whatever. Maybe the pound would fall – but for a country that borrows in its own currency and has an excessive current account deficit, that’s a good thing,” said Krugman.
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