Brexit vote influences Fed call to hold rates steady

Washington - Federal Reserve chair Janet Yellen said next week’s referendum in the UK on whether to remain in the European Union was a factor in the US central bank’s decision to hold interest rates steady at its meeting on Wednesday in Washington.

“It is a decision that could have consequences for economic and financial conditions in global financial markets,” Yellen said during a press conference following the meeting. A vote on June 23 by Britons to leave the EU “could have consequences in turn for the US economic outlook,” she said.

Growing worries over a potential British exit have roiled financial markets, sending stocks lower around the globe in the past week, pushing investors into safe havens like German bonds and US Treasuries, and weakening the pound. Five opinion polls published this week showed “Leave” supporters ahead.

US Treasury Secretary Jacob J. Lew last week warned of repercussions to the global economy, while Bank of England Governor Mark Carney said a vote to exit might lead to a recession in the UK.

The BOE has begun a series of extra market operations aimed at boosting bank funding around the referendum. European Central Bank Governing Council member Ilmars Rimsevics said last week the bank is prepared to offer euro liquidity.

The UK joined the European Economic Community, a predecessor body to the EU, in 1973. It has the second-largest national economy within the 28-member group, behind Germany.

US stocks advanced, with the S&P 500 Index rising from a three-week low, as the Federal Reserve signaled a slower pace of interest-rate increases amid a mixed picture for economic growth.

The median forecast of 17 policy makers remained at two quarter-point hikes this year, though the number of officials who see just one increase rose to six from one in the previous forecasting round in March.

“The pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up,” the FOMC said in a statement after its gathering, where it left the target range for the benchmark federal funds rate unchanged at 0.25% to 0.5%, the first unanimous decision since January.

The central bank reiterated that interest rates are likely to rise at a “gradual” pace.

WATCH: The one thing the Fed should say, but doesn't ... or does it? #Brexit