US deflation
fears keep
QE on table

Mr Villamin said: “With inflation expectations in a downward trend and actual inflation falling to uncomfortably low levels, we see the debate at the Federal Reserve (Fed) shifting toward the need for more QE, not less – this should support further gains in risk assets.”

The Fed’s preferred measure of inflation, the core Private Consumption Expenditure (PCE) price index, fell to 1.1 per cent in March, matching the post-crisis low set in late 2010. It is now lower than the 1.2 per cent trough seen at the depths of the 2008-09 financial crisis.

Mr Villamin said: “While markets have clearly worried about the long-term inflationary consequences of aggressive and unconventional monetary stimulus, the origin of these policies was to avoid a deflationary spiral in 2008-09 that might mimic the Great Depression.

“We believe these concerns remain at the forefront of the Fed’s thinking.”

He was commenting in Coutts’ latest ‘wealth watch’.