Lagarde: "No Concern Over Ripple Effects of Trump Tariffs"
With the return of U.S. President Donald Trump and the expected imposition of tariffs, officials from the European Central Bank (ECB) have expressed their intention to continue lowering interest rates.
On the 22nd (local time), ECB President Christine Lagarde, in an interview with U.S. CNBC at the World Economic Forum (WEF, Davos Forum) held in Davos, Switzerland, stated, "We will continue to lower interest rates at a gradual pace without being overly concerned about overseas inflation risks."
Regarding the possibility that President Trump's economic policies, including tariffs, could raise U.S. inflation and have a ripple effect on Europe, she said, "We are not overly worried."
She also expressed confidence that inflation will reach the ECB's target of 2% by 2025 and emphasized that the disinflation process will continue. The Eurozone consumer price index rose 2.4% year-on-year in December last year. After hitting a low of 1.7% in September, it has increased for three consecutive months.
President Lagarde said, "Markets expect that the U.S. and the Eurozone will pursue very different monetary policies over the coming months," adding, "The ECB and the U.S. Federal Reserve (Fed) did not lower interest rates at the same pace last year." This is interpreted as a statement that the ECB will continue to cut rates regardless of the possibility that the Fed's rate cuts may be delayed due to the Trump administration's tariff policies. The ECB is scheduled to hold a monetary policy meeting on the 30th of this month. The market widely expects the ECB to cut rates by 0.25% on the 30th.
President Lagarde said, "The direction is very clear. The speed depends on the data," adding, "We are walking a regular and gradual path."
The ECB cut interest rates four times last year, lowering the deposit rate to 3%. CNBC evaluated that the market expects the ECB to continue cutting rates to reach 2% by September, contrasting with the Fed, which is expected to cut rates by less than 0.5% during the same period.
Other ECB officials also hinted at a rate cut this month. Jos? Luis Escriv?, Governor of the Bank of Spain, said in an interview with Bloomberg Television, "The market expects an additional 0.25% cut," adding, "That seems to be the most likely scenario."
Concerns about tariff increases triggered by Trump are being carefully assessed. Governor Escriv? said, "The most difficult adjustment is the impact of tariffs. Tariffs are heavily influenced by the reactions of third countries."
On the same day, Fran?ois Villeroy de Galhau, Governor of the Bank of France, said in an interview with Bloomberg Television at the Davos Forum, "We are cautious but not worried about inflation, including the impact of President Trump's policies."
Olli Rehn, Governor of the Bank of Finland, said at the Martti Ahtisaari Institute Economic Forum that "The threat of a trade war and the resulting disruption of international trade are also inflation risk factors," while adding, "On the other hand, if Eurozone economic growth does not proceed as expected, there is also a risk of a sharp drop in inflation."
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