Fed on course to go well past neutral rate
- Key is the demand drivers of inflation—wage and jobs growth, business and consumer sentiment
- Financial market considerations are secondary at this stage, in our view
- If core prices ease and jobs reports become sedate, the Fed will hike by no more than 50bps in Septe
- A winter of discontent, with elevated energy prices even as demand softens, could be on the cards
- Peak inflation will be followed by peak rates; peak USD may be even later
An expected hike, now what?
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