WASHINGTON (MarketWatch) — The Federal Reserve must feel that its mascot is Wile E. Coyote, whose persistent and ingenious efforts to catch the Roadrunner were routinely spoiled by bad luck and bad timing.
Like the famous cartoon character, the Fedâs efforts to gradually increase interest rates have been derailed by forces beyond the control of the central bank, this time by the decision by U.K. voters to leave the European Union.
The Brexit vote crushed global financial markets on Friday.
Read: U.S. stocks run into Brexit buzz saw
Stuart Hoffman, chief economist for The PNC Financial Services Group, said the important risks to the U.S. economy are likely to be indirect.
Businesses and consumers might pull back given the uncertainty about growth and market volatility.
The dollar could rise due to safe-haven trades, crimping exports and dampening growth. The impact will be muted as consumer spending and housing, drive economic growth, Hoffman said.
There is no agreement among economists on how long the Fed will sit on the sidelines.
Read: Post Brexit, odds are up for Fed interest-rate cut
Economists at Bank of America Merrill Lynch now see a rate increase coming in December rather than September.
The Fedâs only message today in the wake of the Brexit vote was to stress that it stood ready to supply emergency dollars to banks if necessary.
Read: Fed, in concert with U.S. and global policymakers, seeks to calm Brexit story
The CME Groupâs FedWatch tool showed a 20% chance of a rate hike in December.
Millan Mulraine, deputy chief U.S. macro strategist at TD Securities, believes the Fed will be on hold until mid-2017.
Mulraine said there was now a 30% chance for a Fed rate cut this year, but only if downside risks materialize.
Former Minneapolis Fed President Narayana Kocherlakota said the U.S. central bank should reverse course and ease policy if financial markets remain weak.
Brexit = large flight to UST safety. Implies large fall in med.-term. US r*. If sustained, Fed should lower IOR by at least 25 bps in July.
— NRKocherlakota (@kocherlakota009) June 24, 2016