Attention Turns to ECB Rate Decision and US Growth Figures 

EU Look at Emergency Supply Chain Measures

Talks in Brussels are continuing over the prospect of the EU placing emergency supply chain measures, which could force certain companies to prioritise the production of essential products.

This follows the European Commission’s proposals to introduce such measures following the full-scale Russian invasion of Ukraine and Covid-19 pandemic which exacerbated supply-side shortages.

According to Reuters, citing Andreas Schwab “mandatory information requests obliging companies to share information on sensitive products and supply chains with an advisory group will be part of the draft”.

The EU’s proposals follow similar measures from the US and Japan, which look to better firm up the stability of supply chains with special economic importance and comes at a time when many governments have looked at reshoring measures.

ECB Expected to Hold

Today will see the ECB make their latest interest rate decision, where the general market consensus is projecting that Frankfurt will hold. Such a decision would mean that their main refinancing operations rate would stay at 4.5%, while their marginal lending facility and their deposit facility is maintained at 4.75% and 4%, respectively.

While Frankfurt stated their latest tightening cycle in July 2022 – and subsequently enacted 10-consecutive rate hikes – the ECB have since held rates two consecutive times.

The consensus, which points to a hold, comes as the Eurozone faces challenging economic headwinds with stagnant growth across many of its member states. Nevertheless, inflation continues to be above the central bank’s 2% target rate having averaged 2.9% in December 2023. This print was particularly concerning for policy makers given that it marked a ½ percentage point increase from the previous figure in November.

Looking further ahead, the general market consensus is forecasting that Frankfurt will make 130bps of cuts this year, with their first monetary loosening taking place in April or June.