Summary
The week was dominated by a focus on inflation and manufacturing data. US core inflation was anticipated to drop slightly to 3.8%, while overall inflation was projected to increase marginally to 3.2% from January's 3.1%. The US producer price index may see a slight monthly decrease but may remain positive at nearly 0.3%. Meanwhile, German wholesale prices are expected to decrease year-on-year by 2.5%, and wholesale prices in India ar expected to show a slight overall increase, particularly in food prices. Euro area inflation is projected to be at 2.6%, while industrial production in both the UK and Euro Area are expected to show declines.
The US Energy Information Administration's March short-term energy outlook reflected uncertainty and increased risk due to the Red Sea situation and OPEC+ production cuts, leading to a tighter market forecast. The European Central Bank published its macro-economic projections, anticipating a lower recovery in 2024 than previously expected. Inflation was projected to moderate further, and real GDP growth was expected to remain subdued in early 2024 before strengthening. The ECB's technical assumptions about interest rates and oil prices influenced its inflation projections.
The ECB also highlighted global trade recovery and the potential impacts of the Red Sea situation, projecting a growth rate of 2.8% in 2024. An analysis of a scenario involving a de-facto closure of the Suez Canal showed potential declines in global trade and increased inflation, particularly affecting the Euro area. Overall, the ECB's report suggested preparations for rate cuts later in the year, despite maintaining the rate unchanged at the latest meeting.
