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SMP five hundred index sliding for a fifth day. The SMP erasing gains that earlier are poised to be the biggest in three weeks. Today it fell three points to two thousand seventy want to drop of two tenths of one percent. Nastack down eight also a drop of two tenths of one percent. Dow Industrials down thirty four. That to a drop of two tenths of one percent. Ten year yield one point five seven percent up eleventh aready seconds, Gold up six seventy the ounce again there of point
five percent. I'm Charlie Pellett. That's a Bloomberg Business flash. The Brexit vote on Bloomberg Radio the Brexit vote June three. Will voters in the United Kingdom will they decide to leave the European Union or will they remain a member of the EU and what effect will this have on us policy? Let's find out more. We have vincent Reinhardt. He is the chief economist of Standish Melon Asset Management.
He was also the former head of the Federal Reserves Monetary Division, and previously he also served as the Secretary and the economist of the Federal Open Market Committee. Vincent Reinhart, thank you very much for being with us. Tell us about your reaction to today's Federal Reserve statement and no
move in interest rates? Well, I mean this afternoon, this the Reserve gave us a basically devish message, not so much in the statement which was little changed, just marked to market, but in terms of the characterization of their future policy, the dots and the Jannet Ellen's press conference, so in terms of let's just flush that out, because you know, there's a slight downgrade to their gd GDP forecast for this year, slight upgrade to their inflation forecast.
But it was the number of dots that are now saying we only see one interest rate to increase this year instead of two unless recall four was the forecast the majority had in December. Right now, I think it's significant in in two ways. They as you noted, they didn't change their economic outlook really very much. What they said is they need a lower path for policy in order to get that outlook. I EI, there must be more headwinds, and they've made a fundamental reassessment how much
they'll ultimately have to tighten. Uh So they moved it at the front end of their great guidance and at the back end of the great guidance. The second part of their six policymakers saying they only see one one tightening in two thousand and sixteen is that this is a committee that doesn't follow the median voter theory. What matters is a consensus, and it's hard to see how six of them are going to get convinced over the
rest of the year to tighten more than once. Vincent Reinhardt, turn your attention now to the United Kingdom and the June referendum. First, what do you believe will happen? And maybe give us two versions the scenarios based on your sort of looking at the situation. I know that they were. I was just looking. There were pictures today of a
flotilla of boats in the Thames. They call it the Battle of the Thames, in which boats, UH, flotilla of Scottish fisherman of were agitating for Britain to leave, and they were met by dinghies and pleasure cruises, all supporting remaining in the EU, sort of a reverse Dunkirk where it was going away from Europe breather than going to it. I think there's a couple of things to him about
about this. First, we know it's important for monetary policy, because Jenny Ellen told us that this afternoon when she said international considerations loomed large. Uh. The important things when to remember is if the vote is to leave, we don't know what Britain will leave too, because what it does is open up two years worth of negotiations to reconstruct the apparatus of the Common Market by bilateral trade relationships. So there's gonna be a lot of uncertainty, uh, in
the event of a leave vote. In the event of a stay vote, markets have h not have increased, only priced some of that autom market. So you're gonna get a reaction either way if it's fifty fifty, which is probably as good a way to guess right now as any UH something happens in financial markets on the morning of UH And of course Janet yellen first question at the press conference right out of the gate, asked by a reporter with a British accent, by the way, was
how much of it role did this play? And she said very clearly that yes, it definitely played a role in the decision to hold off on even considering seriously another rate hike anytime soon. Um. But again, if if that goes out of the way, okay, let's say there's a stave vote. So now that you've limited that uncertainty, if the next job's report is strong, because later in the press conference she was asked about that, she said, well,
it's not impossible. Every meeting's live. I guess now you're focused on the FED depends on your forecast for jobs in particular economy More broadly, I would always hope the forecast on the dependent on jobs in the economy. More generally generally, I think there's sincere when they say all decisions are data dependent and made meeting by meeting. Assuming we get Brexit out of the way and the decision doesn't Royal financial markets, the next big number will be employment.
But i've gotta you've gotta admit the way she answered the question with the double negative, it's not impossible. Uh, kind of made me think that the bar is pretty high. Because what was significant about some of her Cherry Ellen's remarks from the press conferences. She said she needed reassurance. She the committee needed to know that to be confident about the outlook. One data point doesn't do that for you.
So yes, I think there is a strong enough employment report that would get them get tightening back on the table in July. That's probably a one in four chance, um. But the plain fact is if they don't tighten in July, they will probably only tightened once this year, and that would be in December. If they're not confident how market takes their the reaction to reacts to their policy action, They're not gonna want to do two tightenings in relatively
quick succession. Vincent Reinhardt, as the chief economist of Standish Melon Asset Management, what are you telling your salesforce, your customers, your clients about Brexit? Because I'm looking, for example, at the dividend yield of the foot see one index stock index, it's over four and a half per cent. Is investing in Britain a bullish call for you? So right now, UH, it is a risky call because if it is about you know, fifty fifty UH stay versus is leave, you
know there'll be a response in markets. You also would suspect that the response will be asymmetric i e. UH. If the decision is to stay H then that gets priced out of markets and the adjustment can be pretty quick in orderly. But if the vote is to leave, then it opens up just a world of uncertainty, and it also sets a precedent for other European UH actors to really question the integrity of the European Union. And also remember London is a financial center, UH, lots of
cross border claims. In an uncertain environment, they'll probably be some withdrawal from risk taking. So UH, the first thing to recognize is there's risks either way, but the risks are not not symmetric. UH. Risk on is gonna be a lot less significant for asset prices than if it's
risk off. You know, UH, FED meeting is behind us two more central bank policy shoes to drop, Vince, as you well know, because the Bank of Japan has been having a two day meeting and we're going to get the results just an hours ahead of us, and then keep going around the world. Bank of England is is having a policy decision today as well. What's important to be watching out of those decisions and what are you looking for? Well, first thing to remember is Kennet Yellen
made their life harder. Uh. If the Fed had tightened, you probably would have associated orally signaled a willingness to titans, say in July, you would have expected some dollar appreciation. But from the perspective of government or Kuroda or government or Governor Kearney, that would have been a welcome using of financial conditions in the form of some some currency depreciation.
Now they've got to do the work for themselves. I think the more important actor, obviously is the Bank of Japan, because if Janet Yellen was al then to move in advance the UK referendum, I'm pretty sure Mark Karney has been will be reluctant to move uh, and he's already told us that. UH. For Governor Corota, the issue is what form of additional policy stimulus h does he have. The reaction to making the deposit rate negative has been
very adverse. It's been associated with some um technical difficulties in markets, and so his actions will probably be in terms of the scale and scope of his quantitative using purchases. But it's probably not something that happens tonight. Alright, Vince Rhinhart, thank you so very much for joining us. OK, thank thanks for having me. Vince is chief economist at Standish
Melon Asset Management in Boston. He's a former fedeficial, former head of the feder Reserves, a monetary division, and he says that the FED was definitely devished, and I appreciate what he said about the FED by not signaling any tightening anytime soon and weakening the dollar make the job harder for the Bank of Japan and harder for the Bank of England as they hold and wrap up their policy meetings. Just ahead, Kathleen Hayes and Pim Foxes is taking stock on liber Radio.