ECB/Lane: The Uncertain Impact of US Tariffs on Eurozone Inflation

Forex - European Central Bank Chief Economist Philip Lane stated that high tariffs imposed by the U.S. on imports from Europe will weaken economic growth in the Eurozone, although the impact on inflation remains uncertain. Lane mentioned that economic growth is likely to slow if Eurozone exporters encounter higher tariffs in their largest overseas markets. However, he noted that there are scenarios where inflation could either slow down or accelerate as a result of high tariffs, and that currency movements have a significant influence on the final outcome. "We believe that trade tensions are negative for GDP and that their impact on inflation is uncertain," Lane said. The uncertain impact on inflation complicates predictions about how policymakers at the ECB will respond to higher tariffs. Investors are now expecting the ECB to lower borrowing costs at every meeting in the first half of next year and to cut rates four times in 2024.