r model to assess the prospects for wage acceleration in the near future. If the unemployment rate remains stagnant at its present level, 5.5%, the NAIRU will not get breached and our model implies that wage inflation will not increase. By contrast, suppose that the unemployment rate continues its ra

1, 1§) 1? Seran• aff, 813Crntrerg leave (Pro , Gnu,* arst In terms of wage inflation below we update our wage model to incorporate the Fed's new NAIRU estimates. If unemployment does not continue to fall, there is still no wage acceleration. If it does then with the lower NAIRU estimates wage acce

divided subject of the future economic path and sets the terrain for a period of elevated volatility across various market sectors. Lowering of the NAIRU, the dovish side, means either we do not have the right model or, if we do, then we do not know how to calibrate it. It is not even clear that the

act, continues to do that. Eurodollar contracts show rates well below the Fed dots through 2018 and beyond. Low growth, low inflation, even a lower NAIRU should keep yields below Fed dots. Against the market's forward rates, the curve looks broadly like fair value. Neutral on rates. The v!ev., in sp

the Fed recently "shallowed out" its trajectory for interest rates over the next few years; the other reason being the Fed's lower estimate of the NAIRU. Figure 5: Dollar strength will weigh on net exports for the foreseeable future to %99y 15 1 2 1975 199) 1565 1993 1995 2003 2005 2010 2015 .

1, 1§) 1? Seran• aff, 813Crntrerg leave (Pro , Gnu,* arst In terms of wage inflation below we update our wage model to incorporate the Fed's new NAIRU estimates. If unemployment does not continue to fall, there is still no wage acceleration. If it does then with the lower NAIRU estimates wage acce

act, continues to do that. Eurodollar contracts show rates well below the Fed dots through 2018 and beyond. Low growth, low inflation, even a lower NAIRU should keep yields below Fed dots. Against the market's forward rates, the curve looks broadly like fair value. Neutral on rates. The v!ev., in sp

the Fed recently "shallowed out" its trajectory for interest rates over the next few years; the other reason being the Fed's lower estimate of the NAIRU. Figure 5: Dollar strength will weigh on net exports for the foreseeable future to %99y 15 2 1975 199) 1565 1993 1995 2003 2005 2010 2015 .*&

conditions have eased a bit [email protected] http://houseview.research.db.com TheHouseView Special — 9 December 2015 EFTA01476290 I At NAIRU, broader slack measures also diminished 2010 Note: (*) Our distance measures follow a speech by St. Louis Fed President Jim Bullard on 17 July 20

th pick up over the period ahead. We see the unemployment rate falling into the mid-4% area over the next couple years, putting it noticeably below NAIRU, but not by enough to effect more than a gradual pickup in wage and price inflation. We see core PCE inflation returning to near 2% two years hence

nflation in the US has moved up over the last three months and has a fair degree of catch up to do with the decline in unemployment relative to the NAIRU and rental vacancies. The dollar up cycle should have 10% to go medium term, but speed breakers are now in place to slow the pace. The US trade-wei