The path of monetary policy in the US and UK is unlikely to change significantly because of the recent appreciation of the dollar and the pound. Admittedly, the strength of these currencies is one reason why the “lift-off” may be a little later than previously expected, but we expect both central banks to hike this year – and we still think the Fed may do so in June. In some smaller economies, however, currency movements pose a bigger threat to growth and inflation and are reinforcing the case for policy to be loosened further.
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