Stay informed of free updates
Just register at I economy Myft Digest – Delivered directly in your reception box.
A senior European Central Bank has warned that world trade wars threatened to raise inflation in the euro area, which limits the room for new interest rate drops in the monetary area.
The ECB Hawk Isabel Schnabel, member of the board of directors of six people from the Central Bank, said in a speech in the United States on Friday evening that protectionism and an increase in defense expenses in Europe, especially Germanymeant that political decision -makers should “keep a stable hand and maintain the rates near their current situation”.
“There are risks that a lasting and significant increase in prices will strengthen upward pressure on underlying inflation resulting from higher-term budgetary expenditure in the medium term,” she said in the University of Stanford's University in California.
The EU faces a 20% levy on all its exports to the United States, the president of the Ursula von der Leyen commission said this week that the block “was preparing for all possibilities”.
Schnabel recognized that the trade war Could also contain inflation by reaching demand – with the “especially” shock depending on the final result of tariff negotiations.
His remarks question an increasingly dominant consensus among economists and investors, who predict that the ECB Will make another quarter of a point at its June meeting. Overall, traders are betting on two or three of these cuts by the end of the year.
The ECB has reduced borrowing costs in seven stages since June, lowering its reference rate from 4% to 2.25% during this period.
Even before US President Donald Trump announced “reciprocal” prices on many major trade partners during his “Liberation Day” event on April 2, Schnabel called for a discussion on the break in rate reductions in the euro zone.
In Friday's speech, Schnabel challenged emerging opinion that Trump's trade war Can mitigate rather than increased consumer prices fuel increases in the euro area – a scenario in which the ECB could intensify its monetary policy to avoid inflation underlying its 2% medium -term objective.
In April, the inflation of the euro zone was held stable at 2.2%, exceeding expectations and oscillating above the target of 2% for the sixth consecutive month.
But many analysts have argued that April data was distorted by punctual effects and that inflation expected decreasing in the coming months. This argument is supported by the unexpected strengthening of the euro following Trump's pricing announcements, which will make imports in the monetary zone cheaper. Oil prices have also dropped sharply and US exports are expected to take a hit.
But Schnabel argued on Friday that, in the medium term, higher budgetary expenses and the capacity of the prices to strike the supply chains meant that the risks for inflation were “probably increasing up”.
The president of the ECB, Christine Lagarde, told journalists in April that “the net impact” of the pricing war on inflation “will not become clear than over time”, adding that the fight has created a “negative demand shock” which will have “a certain impact on growth” in the euro zone.
