The Fed is turning off the liquidity spigot and expects to start raising interest rates next year. There are plenty of historical studies showing the relatively benign impact of the first one or two rate hikes. This cycle, though, will be a bit different than what has been experienced in the past. Historically, the Fed is leading the way with interest rate hikes, moving toward tightening ahead of other global central banks. The muted impact of those initial rate hikes may be partly due to the fact that most central banks have still been accommodative. That is not going to be the case this time around. Nine central banks have raised their interest rates in December alone and by the time the Fed makes its first move, a majority of central banks will likely be tightening.
