Federal Reserve policymakers decided in June that interest rate hikes should stay on hold until they have a handle on the consequences of Britain's vote on EU membership, according to the minutes of the Fed's June policy meeting released on Wednesday.

The minutes of the June 14-15 meeting, which took place ahead of the June 23 referendum in which Britons voted to leave the European Union, showed widespread unease over the so-called "Brexit” vote, including among voting members on the rate-setting Federal Open Market Committee.

In wait mode

“Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on the consequences of the UK vote,” according to the minutes.

Worries have only intensified since the vote and Fed Governor Daniel Tarullo cited the rise in uncertainty on Wednesday when he argued for holding off on rate hikes until inflation had turned decisively higher.

At the June policy meeting, policymakers also cited a severe slowdown in hiring by US employers as a reason for leaving interest rates steady last month, the minutes showed.

The Brexit vote, which shocked investors and politicians, has raised anxiety in financial markets around the world, in part because it could take years before Britain and the EU agree to new rules on finance, trade and immigration.

Already, global financial conditions have tightened, with a firming of the US dollar poised to weigh on US exporters.

The dollar, which has gained more than two per cent against a basket of currencies since the Brexit vote, weakened slightly following publication of the minutes.

Before the vote, the Fed had signaled two interest rate hikes would likely be needed this year to keep the US economy from eventually overheating.

But since the British referendum, several Fed policymakers have said the uncertainty warrants caution, including New York Fed President William Dudley who said on Tuesday the Fed needed to be patient on rate increases and that it was too soon to know the fallout from the British decision.

Hiring slowdown

A severe slowdown in hiring during May and weak business investment even outside the sagging energy sector had raised questions about the US outlook even before the Brexit vote.

Still, in the minutes of the June meeting, many Fed policymakers who participated in the policy discussion stressed the sharpness of the hiring slowdown could be statistical noise, and most argued the economy would be ready for rate increases unless a financial or economic shock knocks America off course, according to the minutes.

Since the Brexit vote, the British pound has plunged 13 per cent against the dollar, including a 1 per cent decline on Wednesday, and investors and policymakers are watching out for further signs of financial stress that could hit economic growth in America and worldwide.

“None of us really knows the magnitude and I doubt there will be a moment when people say Brexit is done. It will be something that attenuates over time,” Tarullo said on Wednesday. "There is a good bit of uncertainty.”

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