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In U.S., French vote a relief to some Fed officials
May 8, 2017 / 2:26 PM / 7 months ago

In U.S., French vote a relief to some Fed officials

CHICAGO/AMELIA ISLAND, Fla. (Reuters) - France’s election result alleviates concern about economic and market turmoil in Europe spilling over into the United States, two Federal Reserve policymakers said a day after pro-European Union candidate Emmanuel Macron was elected French president.

Macron’s decisive win on Sunday over Marine Le Pen, who threatened to remove France from the common European market, eased concerns about European integration and was met with relief in financial markets.

“It alleviates some concern in terms of will you see developments in Europe that will then feed through back to the U.S.,” Cleveland Fed President Loretta Mester told reporters in Chicago on Monday, noting a sharp market reaction to the vote could have hit the U.S. economy in the short-term.

“There is also a longer run issue about what does it mean for the integration of Europe - will it stay together - and I think that’s more positive that it will sort of not be breaking apart,” she added.

U.S. stock markets were roughly flat on Monday, near record highs.

The Fed has over the past several years had to steer through a series of overseas shocks, from the Greek debt crisis to collapsing oil prices and volatility in Chinese markets.

Britain’s surprise vote last year to leave the EU temporarily depressed markets and sent the dollar higher, helping to convince the Fed to delay planned interest-rate hikes. A Le Pen victory, and the prospect of a larger EU breakup, might have caused a similar reaction.

But the Macron win likely leaves the Fed’s current plans on track, as officials aim to tighten policy twice more this year.

St. Louis Fed president James Bullard said he felt that the Macron outcome was largely anticipated by markets since the primary two weeks ago.

“I don’t think there was much risk once the final candidates were chosen,” Bullard said. “There did not seem to be much price reaction.”

Writing by Jonathan Spicer; Editing by Chizu Nomiyama

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