With President Trump set to implement a large fiscal stimulus next year, US inflation and interest rates will both rise more rapidly than seemed likely a month ago. This has already had knock-on effects on global exchange rates and bond markets, and has forced Mexico to raise interest rates. But we expect monetary policy elsewhere to remain exceptionally loose for the foreseeable future. As a result, the divergence in monetary policy between the US and other economies looks set to be larger than is currently priced into financial markets.
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