Governor Powell was the first FOMC participant to weigh in on the effect of Brexit on the outlook. Other participants’ remarks did not add much beyond what he said. He noted that Brexit added new headwinds and new uncertainties and had resulted in a modest tightening of U.S. financial conditions so far, but that it was too early to judge the macro effects on the U.S. President Mester added that Brexit is a “developing story” and that, while the risks and uncertainty have increased, “it is too early to judge whether conditions in the aftermath of the decision will necessitate a material change in the modal outlook.” President Kaplan echoed this view, noting, “There’s the financial market adjustment, which we see going on for the last few days, and that will eventually be completed. The second level is what’s the impact on GDP growth in the U.K. and in the EU, and I think the jury is out on that.” Vice Chair Fischer noted that the outlook would be shaped both by the effect of Brexit and other factors: “As we consider the effects of Brexit, we’ve got to put that effect on the U.S. together with what else is going on in the U.S. economy…And probably the other things that are going on are more important for the U.S. outlook…than Brexit all by itself.” Kaplan was perhaps more concerned about spillover effects: “The third issue is—which I’ll be watching but which will take longer, and is in many ways the most significant—is what are the other spillover effects. Is there contagion?” Bullard said that the decline in yields following Brexit probably offset any effect from the small rise in the dollar and that the “verdict so far is that Brexit will not have a big impact on the U.S., possibly zero.”
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