ECB Vice President Luis de Guindos warned about the potential impact of US tariffs on economic growth and inflation levels in the eurozone during a recent interview.
Economic Growth and Inflation Risks
Luis de Guindos indicated that US tariffs could slow down economic growth and keep prices low for several years. However, he expressed confidence that the risk of significant undershooting of inflation below the 2% target is minimal. 'The risk of undershooting is very limited in my view,' he stated.
Pause on Rate Cuts
Despite months of easing policies, the ECB has now paused further rate cuts. Luis emphasized that financial markets have understood the message from President Christine Lagarde. Currently, traders are betting on just one more rate cut, likely towards the end of the year.
Euro's Role in Global Markets
Luis de Guindos dismissed speculation about the euro replacing the dollar as the world's top reserve currency, stating that the eurozone still lacks a complete financial system and defense capabilities to challenge the dollar. 'The role of the US dollar as a reserve currency in the short term is not going to be challenged, in my opinion,' he added.
In light of US tariffs and perceived threats to economic growth, eurozone authorities aim to maintain price stability while also focusing on strengthening defense positions to minimize the impact of trade conflicts.
