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Higher inflation will force the Fed to act soon

We are often characterised as being “bullish” on the US economy, but our economic growth forecasts are hardly upbeat. Instead, where we really differ from the consensus is in believing that even moderate economic growth will be enough to generate a marked rebound in inflation over the next couple of years, forcing the Fed to raise interest rates more aggressively, which will eventually weigh heavily on economic growth. We expect GDP growth to slow from 2.2% in 2016 to 2.0% in 2017 and only 1.5% in 2018.

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