The Fed sent a loud and clear signal that it would like to raise rates in June, but the decision may end up in the hands of the British.
The Fed's release of its April meeting minutes showed the Fed's discussion reflected more of the recent comments from Fed regional presidents, who have also been warning markets were not reflecting its intention to hike interest rates. However, the minutes started a new divide on Wall Street: Fed watchers who think the Fed will move in June and those who think the Brexit vote eight days after the Fed's meeting could hold them back. Brexit is the term for the U.K. vote on whether to remain in the European Union.
The markets had been bracing for a more hawkish message from the Fed, but its emphasis on June was an even hawkier surprise. "They were worried the market was underestimating a rate hike this year," said Mohamed El-Erian, Allianz chief economist. The Fed funds futures are now pricing in a 27 percent chance of a June hike, up from 4 percent a week ago.