United States. Following a first hike in
December 2015, the pace of interest rate
increases in the United States is expected to be
gradual and notably slower than in previous
tightening cycles, reflecting in part low
inflation expectations and U.S. dollar
appreciation. Legacies from the crisis, such as
elevated household debt and weak
productivity growth, also point towards a
protracted period of low interest rates. Since
the tightening cycle has been widely
anticipated, baseline projections assume a
benign impact on capital inflows to emerging
and developing economies. However, as
financial market expectations are susceptible
to scares, risks of volatility during the Fed
tightening cycle remain significant (Arteta et
al. 2015).