United States

Will Brexit affect rate hike timing?


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Over the next two weeks economic data releases will take a back seat to Federal Reserve (Fed) speakers who appear intent on preparing investors for a possible rate hike in either June or July, and as many as two to three rate hikes this year.

This week Fed Chair Janet Yellen will speak at Harvard on May 27. She will likely not make any references to the path of rates this year. This sets up the market to focus squarely on her June 6 address as the next possible opportunity for the Fed to clearly signal whether it intends to hike rates at its June meeting, despite significant financial risks around the June 23 “Brexit” vote in the United Kingdom on whether to leave the European Union. In our estimation the risks around the Brexit vote are substantial and will likely push back any prospective hike into July or September.

This week investors will get fresh data on housing, demand for durable goods, consumer sentiment and the second estimate of first quarter growth that will likely be revised upward from 0.5 to 1 percent.

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