Fed liftoff not likely to cause another tantrum

Backed by our confidence in the US outlook, the Fed is expected to begin hiking its policy rate if not in September  then in December. 

The risk to the Fed's rate hike evolving around the questions of low term premium, the apparent gap between market expectations and the Fed 'dots', reduced market liquidity and the implications for EM capital flows.

The Fed appears very cautious about implementing an initial hike unless it has confirmation that economic conditions are sufficiently robust. This should ensure that the first hike takes place against an environment in which economic growth is not a concern. 

Second, the Fed lift-off should take place against more expansionary monetary policy in other core markets, particularly since the ECB's start of QE.