The repercussions of the recent tariffs imposed by the United States have sent shockwaves through global markets, including the eurozone. ECB chief Yannis Stournaras warns of a higher likelihood of increased inflation and a global trade war following President Donald Trump’s tariff policies, as reported by Reuters.
Stournaras expresses concern that these developments could delay the normalization of monetary policy in the eurozone. “Any further rise in inflation or inflation expectations could delay or even halt the process of monetary policy normalization, worsen financial conditions, and impede growth momentum,” he tells the news agency.
Moreover, the tariffs also pose a significant risk of creating a demand shock in the eurozone, according to the Greek central bank governor as reported in the Financial Times. Stournaras, who is also a member of the ECB council, states, “A noticeable negative impact on growth could lead to activity being much weaker than expected, dragging inflation below our target.”
Stournaras highlights that the eurozone is facing a demand shock at a time when demand prospects were already modest, and inflation was on track to reach the central bank’s target of 2%.
In another perspective, ECB council member Gediminas Simkus argues that the ECB should cut interest rates next week due to Trump’s tariff offensive. “I still think we should cut rates in April, and then, with a lot more information in June – hopefully including more clarity on tariffs and other matters – we can consider whether to wait and see or cut again,” he tells Econostream Media in an interview published on Tuesday.
Market expectations for the ECB to lower interest rates next week have risen following Trump’s announcement of tariffs against foreign countries. The council will make decisions based on current data and available information at next week’s meeting. The ECB’s main interest rate currently stands at 2.5%.
Additionally, ECB member Joachim Nagel emphasizes that the global economic growth outlook has taken a significant hit due to American tariffs. He underscores that the ECB will take responsibility to support the eurozone and is on track to achieve the inflation target this year, as reported by Reuters.
The escalating trade tensions and tariff measures have not only unsettled financial markets but also raised concerns about the potential impact on global economic growth and monetary policy decisions. As central banks navigate this uncertain terrain, the stakes are high, and the need for coordinated responses becomes increasingly pressing.