EFTA01459045

We expect the Fed to raise rates gradually in 2016, before moving to faster hikes as the forces for going slow fade... Main drivers for the Fed Fed's assessment of pace of hikes Impact on US Sign Size Inflation Growth 2016 After 2016 After • Moderate pace Global growth • Marginal pick-up in 2016 and 2017 S. L Inflation • Firming in H1 but • More clearly rising downside risks in H2 toward Fed target • At full employment, Labour to tighten more market • Kept low by growth • Higher as headwinds strength • Wage inflation low O 0 0 ------ but rising headwinds, low fade, productivity potential growth growth rises * +25% since mid- Dollar 2014 strength • Further strength, at slower pace Tightening given Financial • Tightening continues • -50% in 2014, -25% dollar strength, higher conditions but at lower rate Low oil prices in 2015 • Limited further e ( in H1 1 ) rates downside in 2016 • Fed committed to • After a few hikes, • Potential for sharp Other gradual hikes arguments for Richer • Slow tightening to continuing slow less rise if market prices n.a. rates L avoid recession** compelling Fed path in 2016 "sr Impact Pace of More rapid. to High Medium L Low hikes Slow and gradual Q ward-off inflation Deutsche Bank 8 Researdi Notes. (5 Theoretical policy rate that keeps economy at full employrneM and inflation on target. A higher neutral rate requires more hares in the same period of li ne. (—) Al zero rates, easing options are more limited, so the Fed needs lo be more cautious as it raises Fates. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0119255 CONFIDENTIAL SDNY_GM_00265439 EFTA01459045