In the next 6 – 9 months, the US inflation outcome will be the key determining factor of both Fed policy and therefore the longevity of this US economic cycle. Current consensus expectations lean firmly towards a low inflation outcome and therefore a dovish Fed with continued, albeit low, economic growth. The market is currently pricing a 29% chance of a hike by September and a 47% chance of a hike by December, which is broadly consistent with recent Fed governor language. Several factors are consistent with that consensus view. Inflation expectations, according to market & surveyed based measures, are at multi-year lows, commodity prices are flat (Y-o-Y), and producer price inflation is close to ZERO. Our inflation models carry a similar message. It’s clear that beyond the US, deflationary pressure is still a key global theme. Read the full story below to understand the risk of rising inflation.