“Tariffs will delay the normalization of monetary policy” - ECB lists the consequences of the global trade war and high inflation
European Central Bank official Yannis Stournaras said higher inflation and a global trade war following US President Donald Trump's imposition of tariffs could delay the normalization of eurozone monetary policy.
Stournaras, who is also governor of the Bank of Greece, told the annual shareholders' meeting that any further revival of inflation or inflationary expectations could delay or even halt the process of monetary policy normalization, worsening financial conditions and growth momentum.
A rout in global financial markets, triggered by the US tariff scheme, has brought another ECB rate cut closer for next week and bolsters the case for even faster policy easing from the world's second-largest central bank, economists say.
In addition to the United States and Europe, other countries where the US has not imposed duties would also feel the slowdown in global trade, Stournaras said, as global economies are interconnected.
Greece's central banker explained that tariffs imposed on imports from one country would affect other countries participating in global value chains, even if tariffs and countermeasures were not imposed.
Greece's economy, which is expected to grow at a rate of 2.3% this year and continue to outperform other eurozone countries, will have limited direct impact from the U.S. obligations, Stournaras said.
But the country, which exports olive oil and feta cheese to the United States, could see demand for its products and services fall. Also, rising global uncertainty could dampen investment appetite in Greece as it recovers from the 2009-2018 debt crisis.
For Athens, the answer to these challenges lies in maintaining credible fiscal policy, attracting investment and implementing reforms, Sournaras added.
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