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Prepare to be surprised by the Fed in 2017

First published: Financial Times, 13/12/2016

President-elect’s pledge to reignite US growth presents tricky challenge for central bank

On the anniversary of the first rise in US interest rates since the financial crisis, the Federal Reserve’s second increase appears imminent. Although financial markets are pricing a very gentle path up for the Federal Funds rate next year, there is no question that significant change is in the air. There is a lot riding on the outcome.

 Since 2009, financing and funding structures predicated on zero rates have defined the terms of business for, among others, the US and foreign governments, savers and borrowers, mortgages and money market funds, pension and life insurance businesses, debt-funded share buyback schemes and search-for-yield investments. The consequences of a bigger monetary policy regime change, therefore, are important, as global bond markets already sense….Read more: