What Does the Brexit Mean for the Fed and Interest Rates?

July 22, 2016

While the Brexit won’t actually take place until at least sometime next year, many investors and economists are concerned about the ramifications this will have on the global economy. The Federal Reserve is no exception. Prior to the vote, the Fed warned about the effects the Brexit might have, and since then has indicated it would hold off raising interest rates due to these risks. Markets now are giving almost no chance of a rate hike at next week’s meeting and, as shown in the chart above, there is still only a small chance of an increase in September or November. Both the futures market, which is used to calculate the odds above, and most economists give about a 50/50 chance of a hike in December. So while the Fed initially expected to raise interest rates four times in 2016, it seems now there’s a strong chance that there won’t be any.