Member of the Board of Directors of the European Central Bank (ECB), Robert Holcman, said the impact of the announcements of dictatorial The US will probably burden consumer prices in the eurozone and will not create a new exacerbation of inflation.
The Gerakissian Austrian politician also said that the lack of clarity on the situation means that the ECB’s subsequent decisions on interest rates are “completely open”. “We do not know where we will end up,” Holcmann said in an interview with Washington, where he participates in the IMF spring meetings. “But I agree with President Christine Lagarde that so far, the net impact on US duties appears to be rather deflation rather than inflationary.”
After seven reductions from last June, ECB officials who are thinking about lending costs then have to evaluate factors such as the deterioration of business confidence, the strongest euro and how the duties will evolve in the coming weeks.
Merchants added bets on the ECB’s interest rates after Holcman’s milder comments, fully pricing a move by a quarter of the unit at the next June meeting. Swaps imply 65 relaxation base units by the end of the year, which means that two more reductions by a quarter of the unit are fully priced and there is a 60% chance for a third.
US President Donald Trump has suspended some of his duties for three months to allow talks with commercial partners. But even if these negotiations come up with a milder result, Holcman warned of permanent damage to the economy. “The uncertainty created by the US will remain after the 90 -day period,” he said. “There will be signs in the economy, even if duties are reduced again.”
In June, the ECB will be based on a new series of financial forecasts to determine the blow to growth and impact on inflation. But their production is a challenge in today’s environment, Holcman warned. “June’s forecasts will be subject to great uncertainty because it is not clear in which cases will be based,” he said. “And our models are not well equipped to face a commercial shock of this size, because we didn’t have such a shock for a long time.”