Adam Posen, president of the Peterson Institute for International Economics, has said investors have underestimated the Federal Reserve's desire to tighten monetary policy, warning it could lead to a stronger dollar and cause another debt crisis in emerging markets.
The head of the currency institute argued investors were wrong to assume US President Donald Trump's fiscal stimulus would have little effect on the economy and that Fed chair Janet Yellen will remain dovish as the US heads towards full employment. Posen told The Telegraph: "The Fed is going to be far more aggressive than people think. Our view is there will be three to four more rate rises this year." He also predicts the Fed could move to shrink its $4.5trn balance sheet earlier than expected, leading to a drain on dollar liquidity from the financial system which would have a major ...
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