Daily Market Report - 30/03/2015

Last week the ONS said Britain recorded zero inflation in February for the first time since the 1960s. Its widely expected to turn negative in the coming months amid lower energy amid falling food and oil prices. Recently a number of Bank of England officials have publicly dampened any concerns about deflation. This comes as they prepare to enter a period of silence ahead of the general election in May next week.

Bank of England deputy governor Ben Broadbent has joined a group of rate setters who have stated the risk of Britain slipping into a deflationary spiral remains low. Broadbent said "The likelihood of a broad and protracted deflation, afflicting wages as well as prices, is pretty low"

So far low inflation has provided a boost for the economy, providing businesses and consumers with low prices, while safeguarding them from nastier side effects such as wage cuts and lay off's. This is what economists term as  "good" deflation and, while it is unlikely to go on for a  prolonged period  it is seen as positive for demand and output.

The U.S. economy expanded at 2.2 percent annualized pace in the fourth quarter, led by the biggest gain in consumer spending in eight years. The revised increase in gross domestic product, matched the Commerce Department’s previous estimate, according to figures. The report also showed corporate profits dropped in the last three months of the year, capping the worst annual performance since the recession. The rate of economic growth will prove hard to replicate this quarter as another harsh winter weather, a stronger dollar,a port slowdown and a global oil glut will all contribute to lower US growth. 

Chair Janet Yellen said she expects the Federal Reserve to raise interest rates this year, and that subsequent increases will be gradual without following a predictable path. Yellen said on Friday that she expects that conditions may warrant an increase in the federal funds rate target sometime this year. She and fellow policy makers “anticipate that a rather gradual rise in the federal funds rate will be appropriate over the next few years.

Policy makers last week opened the door to an interest-rate increase as soon as June, while also signalling they’ll go slow once they get started. The benchmark federal funds rate has been kept near zero since December 2008.

Key Announcements
EUR - 09:30: Eurozone consumer Confidence (March) expected to increase from -6.7 to -3.7

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