Amid the current trade dispute with the United States, the European Central Bank (ECB) faces the challenge of assessing various factors for its monetary policy, considering “the weakness of the European economy” and the escalating “geopolitical tensions” on a global scale.
This situation is underscored by the “increase in uncertainty, especially due to sometimes contradictory announcements from U.S. trade policies,” which “compel us to be cautious in lowering interest rates,” noted Panetta in a report presented at the Ordinary Assembly of the Participants of the Bank of Italy, as cited by local media.
According to Panetta, the present scenario “is one of a slowdown in consumption and investments,” which on one hand “helps contain inflation.”
Nevertheless, the fight against rising prices “cannot end yet,” making it “essential to carefully monitor all factors that could hinder the return to the 2% target.”
Panetta further emphasized that the current context of geopolitical and trade tensions presents a burden for international trade and exacerbates the fragmentation of the global economy, contributing “to the slowdown of productive activity.”
The ECB has cut rates twice this year, each time by 25 basis points. Following the last meeting on March 6, the institution’s president, Christine Lagarde, indicated that upcoming decisions will be made “meeting by meeting,” and there could be a pause in cuts if conditions warrant it.
