EFTA01459041.pdf

The reasons that kept the Fed put in September and October have now largely dissipated Ahead of September / October FOMCs Current conditions Lower US growth Tighter financial • Hike not priced by market — risk of financial • Market almost fully pricing a hike conditions tightening (stronger dollar, higher rates) • Volatility has abated • High financial markets volatility • Buy into stabilisation and gradual, • Fears of sharp slowdown in China Lower global growth not sharp, slowdown in China • Concerns over US and eurozone growth, • Less concern about downside risks despite solid macro data in US and eurozone • Further strength but largely driven • Concern given 20% rise since mid-2014 by hike expectations Dollar strength _a • Rate hike would have led to further strength • Less a concern following ECB- driven euro rally* • Sharp sell-off in commodities since May- Lower commodity • Weakness continues — though less 4 -- 2015, including nearly 30% drop in oil prices tied to global growth concerns • Worry that it reflects global growth weakness • Strong rebound in labour market Remaining slack in • Some slowdown in labour market and pick-up in wage inflation — labour market • Little evidence of wage inflation confirming diminishing slack ECB delivered less than market expectations on 3-December. leading to a 2%+ Lower US inflation NOW surge in the euro vs the dollar Deutsche Bank 3 ✓ Largely dissipated -- Partly dissipated X Still a concern CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0119250 CONFIDENTIAL SDNY_GM_00265434 EFTA01459041