Brexit: Is It Time to Panic?
What kind of impact is Brexit having on U.S. financial institutions? Relatively little, at least not yet according to Economist Tom Cunningham. Cunningham, retired long-time senior economist of the Atlanta Federal Reserve and advisor to MST on the MST Virtual Economist, offers that the most notable thing to happen since Friday’s Brexit vote is, essentially, European political turmoil. He sees little reason for undue concern among U.S. institutions, little or no exposure from Brexit, “unless they are lending to British institutions or in denominations of British pounds.
“We made it through the weekend without any unforeseen issues,” he said. “If there was going to be an immediate problem, it would have happened over the weekend. The sky didn’t fall.
“Going forward, the issue is how the divorce works out. It’s not going to be pretty. It’s not going to help anybody. There’s going to be a lot of turmoil. The biggest risk is political uncertainty.”
Underscoring the uncertainty, he pointed out, is that the referendum is not legally binding and that Brexit leadership is already backing off some pre-vote promises.
An initial estimate from Morgan Stanley is for a .2 percent negative impact by Brexit on U.S. GDP, but that is “very preliminary and subject to revision as negotiations unfold,” Cunningham noted.
“We’ll know a lot more in a month,” he concluded, suggesting institutions adopt a “vigilant wait and see” stance on Brexit.