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The European Central Bank must be ready to reduce loan costs to “slightly below” 2 percent, since global commercial wars threaten to reduce consumer prices, said a senior official.
“If I look at the economy, the clashes we face and uncertainty about growth, could guarantee a little support, “said the governor of the Central Bank of Belgium, Pierre Wunsch, to The Financial Times in an interview before the next meeting of the ECB on June 5.
This could involve reducing the key deposit rate of the Central Bank to “slightly below 2 percent,” he said. The ECB has reduced its reference interest rate seven times from June 4 percent to 2.25 percent.
The markets currently expect the ECB to reduce indebtedness costs in a quarter quarter in June and again in the same amount in the second half of the year to carry the rate of the tank installation to 1.75 percent, according to Reuters data. Some economists predict that the Central Bank could have to increase rates again in 2026.
Wunsch said “I wasn’t shocked” when he looked at the market forecasts. “The way I read them is that, somewhere at the end of 2025, we could be a bit supportive,” he said.
Wunsch’s comments in favor of more cuts mark a marked deviation from its relatively auxiliary posture in the past. In February he had told the FT that the ECB should not “2 percent sleepy walks [interest rates] without thinking about it. “
Their comments also mean that the ECB Hawk Isabel Schnabel seems to be increasingly isolated among the 26 members of the Governing Council of the ECB that decides the rates. Schnabel argued in a speech in the United States on May 9 that global trade wars threatened to increase inflation in the eurozone, limiting the space for more interest -rate cuts.
By explaining his change in view, Wunsch said that developments from the tariff ads of the president of the United States, Donald Trump, on April 2 had created clear “downward risks for inflation” in the euro area, as well as additional threats for economic growth.
EUROZONA inflation remained above the 2 percent objective of the ECB in 2.2 percent in April, although economists said that factors such as the lowest oil prices had not yet fed consumer prices.
Wunsch also pointed out the surprise appreciation of the euro against the dollar after the so -called Liberation Day, when Trump announced tariffs pronounced to most US commercial partners, including taxes of 20 percent in almost all EU exports. These “reciprocal rates” were reduced to 10 percent on April 9 for 90 days to allow negotiations.
The strongest euro meant that imports had become cheaper for European consumers, which could slow inflation, Wunsch argued. The sharp drop in energy prices since the beginning of April and the cheapest goods perspective in China probably had similar effects, he added.
The new expenses plans for the debt of € 1 billion from Germany to strengthen their army and public infrastructure will not compensate for the drag of the inflation of the short -term fees wars, Wunsch said.
“Fiscal policy has been supporting for a long time,” he said, arguing that the euro area can be exposed to a “negative [economic] Shock in the short term “, which can be followed by a” positive shock in 2026 and 2027 “.
While arguing against a too aggressive position, the governor of the Belgian Central Bank currently saw no case for a higher half -point cut in the predictable future. Wunsch also emphasized that he was currently “not pleading” that interest rates decrease below 2 percent “but I am open to contemplate this possibility.”
The president of the European Commission, Ursula von der Leyen, said this month that the EU remained “completely committed to finding negotiated results with the United States”, but the block was preparing for “all possibilities.”
Wunsch warned that even in the United Kingdom’s commercial agreement with the “reciprocal rate” of Trump was 10 percent.
“That is great,” Wunsch said, adding that he would probably lead to “less growth in the US, potentially higher prices and less efficient value chains.”
