(Reuters) - Global headwinds that have partly prevented the U.S. central bank from raising rates again may have dissipated and Britain’s upcoming referendum on the European Union should not affect the U.S. economy, St. Louis Federal Reserve President James Bullard said on Thursday.
“International influences...appear to be waning during the first half of 2016,” Bullard said in a speech at an event in Santa Barbara, California.
Fed policymakers in March forecast two rate increases this year but have been cautious amid slowing global growth and mixed U.S. economic data.
Traders currently see the Fed next raising rates in December, according to an analysis of fed fund futures by the CME Group.
Bullard told reporters before the speech that for the time being there is “obviously a pretty big gap” between the markets’ prediction for future rate rises and the Fed’s own and it was difficult to conclude who is more accurate.
He also said that he does not see Britain’s referendum in late June on whether to stay in the European Union as a global stress event.
“Even if the UK votes to exit there will be a long period of negotiation,” he said, contrasting with Atlanta Fed President Dennis Lockhart, who said earlier this week the vote could “loom large” over U.S. policymakers’ next meeting on June 14-15.
In weighing up the health of the U.S economy, Bullard cited conflicting signals. Recent readings show financial stress has fallen and that the effects of a stronger dollar also appeared to have waned, he said, adding there has been a recent uptick in inflation and the labor market is “at or possibly well beyond reasonable conceptions of full employment.”
However, he noted recent actual data and tracking estimates suggest U.S. gross domestic product growth remains below 2 percent. He also called market-based inflation expectation measures foreseeing inflation far below the Fed’s target for years to come “a bad signal.”
The next major indicator comes on Friday when the Labor Department issues its monthly employment report for April.
The Fed hiked rates for the first time in a decade from near zero in December.
Reporting by Lindsay Dunsmuir and Howard Schneider in Washington; Editing by Andrea Ricci