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The Independent UK
The Independent UK
Business
Hazel Sheffield

Federal Reserve chair Janet Yellen warns Brexit could hit timing of US interest rate rise

Janet Yellen's every word is routinely scrutinised for any hint that the Federal Reserve, or the US central bank, might be about to put up interest rates, which has implications for economies around the world.

But the chair of the Federal Reserve revealed that Brexit is weighing on that decision at a recent appearance at the World Council of Philadelphia.

She warned that a UK vote to leave the European Union could hit US demand and affect the timing of the next interest rate rise.

"One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A UK vote to exit the European Union could have significant economic repercussions," Yellen said.

She said that US interest rates would rise gradually as long as the US economy continued to improve, but that "significant shifts" in the outlook for the economy could affect the timing of rate hikes.

"If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate and most conducive to meeting and maintaining those objectives," she said.

Multiple global leaders have added their voices to the campaign to keep the UK in the EU. In April, US president Barack Obama said that the US needed the UK to stay within Europe.

The President characterised Britain as the strongest US link with the EU and said co-operation would be “far more effective” if the UK voted to remain.

That month Christine Lagarde, the managing director of the International Monetary Fund, named Brexit as one the immediate threats to the global economy. 

Whether the UK votes to leave or stay, markets are already becoming more volatile in the run up to the vote on June 23.

The pound slid to fresh lows on June 6 after several polls showed support for the Leave campaign was growing ahead of the EU referendum. 

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