Although we expect the Fed to raise interest rates faster than most anticipate over the next two years, the resulting appreciation of the dollar should be much more modest than last year. Following a massive 10.9% increase in 2015, our forecasts imply a 1.3% gain in the trade-weighted dollar this year and a 0.2% decline in 2017. Accordingly, the drag on inflation from falling import prices should all but disappear soon.
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