The biggest macroeconomic curveball of 2016 has been the decision by British voters to leave the European Union.
The news sent markets around the world reeling, while investors have fled to the safety of government debt, sending yields on the world’s safest assets to record lows. And while the Federal Reserve has gotten flak for not anticipating the economic stagnation that has gripped the wealthy world in the wake of the 2008 financial crisis, the minutes of the Federal Open Market Committee’s (FOMC) June policy meeting, which were released on Wednesday, show that committee members were anticipating that the Brexit vote could cause serious financial turmoil.
When considering raising interest rates, “participants generally thought that it would be prudent to wait for the outcome of the upcoming referendum in the United Kingdom on membership in the European Union in order to assess the consequences of the vote for global financial market conditions and the U.S. economic outlook,” the minutes read.
Although stocks in the United States recovered last week after falling in the days after the June 24 vote, investors piling into government bonds suggest that there is still a great deal of uncertainty as to how a Brexit will ultimately affect the global economy. Federal Reserve Governor Daniel Tarullo said Wednesday that central bankers are still assessing the effects of the decision. “We’ll have to watch and see over the medium term. There is a good bit of uncertainty,” he said.