The European Central Bank (ECB) is expected to maintain its unchanged fees on Thursday, July 24, after seven consecutive decreases, despite the threat of President Trump to impose a great surcharge on imports from the European Union, observers say.
Since mid -June, its main remuneration of tanks for deposits has been located at 2%.
Christine Lagarde, president of the institution, had warned in June that the ECB had reached “at the end of a monetary policy cycle”, after having to counteract the successive clashes of Covid-19, the war in Ukraine and the energy crisis, which had fed a strong inflation impulse.
This cycle had seen that the euro goalkeepers drastically increased interest rates for two years to contain price increases before releasing the flange since June 2024 to support inflation stabilization.
Inflation progressed very slightly in June in the euro zone, with 2% for a year, after 1.9% in May, but remains in line with the objective of the ECB.
Pause relaxation
Christine Lagarde repeatedly repeated that the ECB is “in good position” to face economic uncertainties, particularly those linked to customs tasks, another indication that the institution should decide on Thursday a break in the monetary softened cycle.
The influential director of the German Central Bank, Joachim Nagel, clearly begged that the status quo “reassess” the situation at the September meeting.
In sight: persistent uncertainty in the commercial conflict with the United States and its uncertain effect on prices.
On July 13, a new step was reached, when the US president threatened to apply a basic tax of 30% on August 1 on August 1, a price that could increase even more in case of EU retaliation measures.
This mass rate far exceeds the most extreme scenarios that the ECB was established in an attempt to refine its economic forecasts for the euro zone.
Very fragile growth
According to Berenberg Salomon Fiedler economist, a commercial war “would weigh on still fragile growth and could delay recovery beyond 2025”. The current uncertainty already slows investments and complicates commercial decisions.
And the impact would also be felt in the United States, where “30% taxes in European exports would increase the inflation of US consumers of approximately 0.3 points”, which further complicates the federal reserve task to reduce their rates.
In June, the ECB had built its economic projections on the assumption of the tasks of US limited to 10% in European exports. However, a commercial agreement remains possible in early August, which could calm the crisis.
Another development to monitor euro guards: the euro flight compared to the dollar. The common currency was appreciated between April, when Donald Trump launched the commercial war, already the end of June, from 1.08 to $ 1.18 for one euro.
For exports, a strong euro makes European products more expensive abroad, therefore, less competitive for sale.
On the contrary, this reduces the cost of imports, especially energy, which can delay inflation in the euro zone.
Hence the urgency of waiting, believes in several members of the BCE governors council.
Source: BFM TV
