Halister News

(Bloomberg) -- “The Fed will likely delay the hiking cycle,” as Brexit will reduce U.S. GDP growth by an est. 0.2ppts over next 6 qtrs, BofAML economists led by Ethan Harris write in note Fri.

• Outcome of Brexit vote “is another in a long string of confidence shocks,” hits an “already vulnerable” U.S. and global economy
• Drag to U.S. GDP will show up as early as next qtr; this leaves 2016 annual growth at 1.8%; slices 0.2ppts from growth next yr, bringing it also to 1.8%
• Fed will delay next hike until Dec., followed by 2 more hikes next yr in June and Dec.; BofAML is “simply pushing out our forecast trajectory by a quarter”
• Change in forecast depends “critically” on extent of slowdown in European growth, size of confidence shock and move in USD
  • Given high degree of uncertainty, “we will be nimble” in adjusting forecasts as needed