September 21 is as critical a date as December 14 because it marks a change in policy regime, according to the global fixed income CIO of BlackRock.

In a market report, Rick Rieder said: 'We think U.S. policy rate normalization is long overdue, and more interestingly, we believe the move reinforces a broader global policy evolution, or regime change as we’ve referred to it elsewhere, involving a reduction in monetary policy influence and a turn toward fiscal initiatives.

'In fact, we would identify September 21 as just as critical a date of policy regime change, as on that day the Bank of Japan unexpectedly announced a shift away from its emphasis on negative policy rates and instead put forward a significant policy adjustment and plans to overshoot its 2% inflation target in an intentional manner.

'Similarly, we think that the renewed interest in letting yield curves steepen, and engineer moderately, but not excessively, higher rate levels, was evidenced by the European Central Bank’s recent “non-taper taper,” although we have said the publicly, the ECB may have missed an opportunity for even bolder and more productive policy change.'

He thinks the specific directives towards steepening yield curves and balancing monetary and fiscal policies should consequently lead to re-rating growth and inflation higher in these regions.

According to Rieder, developed market central banks are now realising that negative rates and flat yield curves hold little utility.

'In the end, we think central banks are now heading down more appropriate policy paths, and markets will continue to respond accordingly.

'That is to say that risk markets are likely to be well supported, rates can move moderately higher, inflationary expectations can continue to accelerate, and most importantly, economic and financial investment can and will grow alongside of this.'

Year-end projections surprise

On December 14, the US Federal Reserve board of governors voted unanimously to increase the overnight repurchasing rates to 0.5-0.75%.

The Fed is also projecting three rate hikes in 2017 on the back of a potential rise in government spending.

The discount rate has also been increased by 0.25% to 1.25%.

While the announcements were widely anticipated in markets, the year-end projections for the fed funds rate in 2017 surprised the CIO.

'What was somewhat surprising was the moderately hawkish tilt in Committee members’ year-end projections for the fed funds rate in 2017 (median of 1.375 vs. 1.125 in September), 2018 (2.125 vs. 1.875), and 2019 (2.875 vs. 2.625).

'Of course, this could well be the realization of reflationary potential being a bit stronger today than a few months back.'