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Markets to face temporary headwinds

Lale Akoner
Lale Akoner10/21/2021 09:32 PM GMT+08  • 3 min read
Markets to face temporary headwinds
The slowdown in growth and recovery has made markets nervous, which could lead to increased volatility in the coming months.
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The slowdown in growth and recovery has made markets nervous, which could lead to increased volatility in the coming months.

Globally, markets are continuing to watch events in China, as well as communications from the Fed closely. The market also remains focused on further labour market progress, whether consumers will spend a significant portion of the additional savings they have accumulated since the start of the pandemic, and relatedly, whether higher inflation will be transitory.

Across major economies, the market appears to be pricing in a small and gradual rise in interest rates over the next few years. This said, our outlook for policy rates is more aggressive than the markets’ one, as our inflation forecast is stronger than the market’s and we see significant risks of a hawkish turn in monetary policy over our two-year forecasted horizon.

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