Trade uncertainty "covers" Europe - ECB head warns of economic slowdown, despite pact with US
The eurozone economy is likely to experience slower growth this quarter, while uncertainties over global trade remain present, European Central Bank President Christine Lagarde said.
Lagarde said the 15% tariff currently applied to most European goods is slightly higher than what the ECB had forecast in June, but "significantly lower" than a negative scenario that had also been under consideration.
“Recent trade agreements have mitigated, but certainly not eliminated, global uncertainty, which persists due to an unpredictable political environment,” she said. According to Lagarde, uncertainty persists because “special tariffs on pharmaceuticals and semiconductors remain unclear.”
These are Lagarde's first comments since the European Union and US President Donald Trump reached a trade deal. ECB officials are expected to leave the key interest rate unchanged at 2% when they meet again in September.
Most representatives consider this interest rate level to be appropriate, neither stimulating nor inhibiting economic activity. Some others, however, have suggested that the possibility of further reductions should not be ruled out.
"ECB staff will take into account the impact of the EU-US trade agreement on the euro area economy in the September forecasts, which will guide our decisions in the coming months," Lagarde added.
The 20-nation eurozone economy unexpectedly grew by 0.1% in the second quarter, showing resilience in the face of trade and geopolitical challenges. Inflation remains around the ECB's 2% target.
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