Our central forecast is that US interest rates will be raised twice this year, probably in September and December, but we suspect that the chances of a hike on 15th June are rather higher than the 30% currently priced into the market. What’s more, whether the Fed moves next month or waits a little longer – perhaps for “Brexit” uncertainty to clear – the markets are complacent about the risks of further tightening over the next couple of years. Context, however, is everything: the gradual normalisation of US interest rates will remain contingent on favourable economic and financial conditions that should limit the downside for asset prices, at least in the rest of the world.
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