Beyond US Economy, Brexit And Cyberthreats On Top Of Fed’s Mind

Brexit. Recession. Cyberthreats. It’s a thankless job, one assumes, being a central banker.

In testimony before Congress on Tuesday (June 21), Fed Chair Janet Yellen said that the probability of a recession this year remains low and that she expects economic growth moving forward. That’s the headline.

But what about other issues, near and dear to banking’s heart? For starters, the interest rate climate is likely to stay the same, at least until July. That follows a pause that led into June, which was a bit of a surprise to the markets at large, since the Fed had telegraphed two (and maybe more) interest rate boosts this year. That may be off the table into the end of the summer.

But beyond the vagaries of interest rates and consumer spending, Yellen noted that there are a number of other concerns, such as the looming Brexit vote this week — “could have significant economic repercussions.” And China remains a situation worth watching. Those are two areas that could have significant impact on the banking sector proper, as China’s demand has supplied much of the gasoline driving, say, consumer goods spending (and payments, investments and cross-border transactions); if risk appetites change, that could affect retail investors (and tech IPOs and stock brokerage accounts).

Negative interest rates do not appear to be on the table, which would be detrimental to savings rates (and small banks, where regulatory burdens have been cited as a key Yellen concern over the past several months).

In remarks to lawmakers, Yellen said that cybersecurity remains a significant threat, and this follows news from earlier this week that the Fed has engaged its internal watchdog to monitor how banks are faring with their own internal practices to ward off hackers and others.