WASHINGTON (Sputnik) — Political and financial uncertainty from the UK decision to leave the European Union, known as Brexit, could last for months or years, the US Office of Financial Research (OFR) said in a report on Thursday.
"The United Kingdom's vote to leave the European Union was the defining focus of financial markets in the second quarter," the report stated. "Although the immediate market volatility has subsided, the policy uncertainty and the ultimate financial and political spillovers may last for months or years, leaving markets vulnerable to further confidence shocks."
The OFR noted that there has already been political turmoil in Britain, as Prime Minister David Cameron immediately announced his resignation following the vote. Cameron turned over the government to his successor Theresa May on July 13.
Additionally, the Brexit negatively impacted the UK currency and European financial stocks, while the flow of investments to safe havens pushed long-term interest rates in the United States to historic lows.
While US risk assets have rebounded, the pound sterling and European stocks remain weak, the OFR stated.
Moreover, oil futures prices decreased more than 7 percent over two days before partially recovering, and remain more than 50 percent lower than 2014 peak levels.
The OFR explained that economists expect uncertainty will cause UK and EU businesses and consumers to delay spending and investment, slowing economic growth.
