Wednesday preview: UK Budget 2016, FOMC rate decision
Wednesday is set to be busy with the release of the UK Budget 2016 and the US Federal Reserve’s latest policy announcement.
Chancellor George Osborne has warned that the Budget will include public spending cuts, which he said these will work out "equivalent to 50p in every £100" by 2020.
However, while he has rejected claims the cuts would affect disability benefits, the levy on fuel duty is predicted to be raised for the first time since 2011, although Osborne has not confirmed the reports.
Among future spending plans, it is also expected that Osborne will accept recommendations from the Infrastructure Commission to build a high speed rail link between the northern cities of Manchester and Leeds, as part of an initial commitment of £300m for major transport projects in Wednesday's annual Budget.
Other schemes to get the green light will include an 18 mile road tunnel beneath the picturesque Peak District and a north-south London link, known as 'Crossrail 2' to connect the outer London regions of Hertfordshire and Surrey.
Following the Budget frenzy, the Federal Reserve will announce its latest policy decision. The central bank is expected to stand pat on interest rates amid concerns about a global economic slowdown fuelled by emerging markets. The Fed raised interest rates for the first time in almost a decade in December and has since left rates unchanged.
“The market is currently implying a 66% probability of a rate rise at the September meeting and a 51% one in June, however while rate expectations still remain tilted towards at least one rate rise and maybe more this year, it is highly unlikely that the Fed would feel confident enough to move on rates after June, whether they choose to hike then or not,” said Michael Hewson, chief market analyst at CMC Markets.
“While the tone of Ms Yellens’ press conference will be important in the context of whether the Fed has any significant concerns about a continued overspill from China and the rest of the world, it could well be domestic considerations that come in to play when looking at factors that might determine the Fed’s rate hike cycle.”
Wednesday 16 March
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