US core PCE was 1.7% y/y in February

Market Movers

Federal Reserve chairwoman Janet Yellen will speak in New York tonight. After her Texas Fed’s Kaplan is set to speak.
The US Conference Board’s consumer confidence index for March is released today. The index has been range-bound over the past year but is currently at the lower end of the range. We expect a rebound to 94, suggesting that consumers are still quite upbeat.
M3 money supply and bank lending for February due today will give the first data point in determining the price on the ECB’s new TLTRO II loan. The lending figures are relevant as the interest rate on the new TLTRO II loan is dependent on lending growth in the period from February 2016 to January 2018. If a bank exceeds its benchmark in the TLTRO II loan it will be charged a negative rate down to the deposit rate over the entire period of the loan. Note the seventh auction on the TLTRO I is scheduled for 30 March and could be a bit more interesting than the previous ones as the amount borrowed can be rolled over into the new TLTRO II.
In Sweden, we receive trade balance data and retail sales data, see Scandi Markets.

Selected Market News

US core PCE was 1.7% y/y in February, unchanged from 1.7% y/y and below our and the consensus expectation of 1.8% y/y. Although, on an unrounded basis, it was the highest core PCE inflation reading since January 2013, it marked the 46th consecutive month that inflation has undershot the Federal Reserve’s 2% inflation target. Yesterday, Atlanta Fed cut its forecast for Q1 US GDP growth to 0.6% y/y from 1.4% y/y, which hints that the US economy might be looking at another quarter of weak growth.

The all important March job report is due on Friday and financial markets will look to see whether it will once again be strong enough to overshadow downbeat signals from other economic key figures and whether it will be strong enough to justify recent comments from Federal Reserve officials, which have been on the hawkish side talking up the probability of a next rate hike in the coming months.

Yesterday, oil and energy ministers from Oman and Indonesia pledged to attend the 17 April meeting in Doha. All OPEC members except Iran and Libya thus look set to join the meeting, where the production freeze accord from January will be on top of the agenda. The news does not look to have left a mark on the oil price – the price on Brent crude has inched below USD40/bl.

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