The Federal Reserve Bank of St.Louis President James Bullard on Tuesday said Brexit wouldn’t have a significant effect on the U.S economy, and that a drop in the U.S. bond yields is not a warning on the economic outlook.
According to Bullard “now that the markets have had some chance to digest the move, the ultimate impact on the U.S. economy will be close to zero.”
In his speech, Bullard explained that the shock of the Brexit vote is the reason why yields on U.S Treasuries is at historic lows, this he said Wall Street interpreted as a slow growth in the U.S.
“I think it’s a flight to safety. I would not take it as a signal of U.S. growth prospects.” he added.
On the June non-farm payrolls, Bullard said the positive report has finally put to rest May’s poor performance. Although, the three-month average for employment growth indicated the trend is slowing as expected, May’s 38,000 jobs can best be described as “an anomaly”.
“I would expect continued slowing in the pace of job growth,” he said. “We can’t add 200,000 jobs a month anymore.”
Tightening labor market may not trigger higher inflation, because GDP growth will likely remain around 2 percent.
“If there was rapid job growth that seemed to be associated with very high economic growth, in that situation we might have to adjust a little bit,” Bullard said.