European Central Bank (ECB) bosses express fears over global trade war
Policymakers at the European Central Bank (ECB) expressed deep concern about the possibility of an all-out trade war with the US during a meeting last month, according to minutes released today.
ECB leaders also elected to continue the bank’s bond buying programme in order to strengthen inflation and stimulate demand.
Minutes from the governing council meeting on March 7 and 8 show that there was “widespread concern” among policymakers of trade conflicts “which could be expected to have an adverse impact on activity for all countries involved”.
However, the ECB cautioned that the impact on the global economy and on the euro area “would ultimately depend on the scale of import tariffs imposed by the United States, as well as the scope of any retaliatory measures.”
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Despite continued economic growth in the euro area, the ECB expressed concern that financial conditions had worsened amid volatility in foreign exchange markets. Of particular concern was the impact of an ever-strengthening euro, which, the general council feared, “could be expected to have a more negative impact on inflation.”
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Inflation, which has remained weak throughout the eurozone in spite of the massive stimulus programme, remained one of the ECB’s central concerns in the meeting. Saying that “measures of underlying inflation remained subdued” the ECB emphasised “prudence, patience and persistence in monetary policy,” despite the fact that the region is unlikely to meet the bank’s inflation target of nearly two per cent any time soon.
The ECB has instead decided to continue its bond-buying scheme, a programme which the ECB believes has depressed borrowing costs, kick-started growth and helped fight off the threat of deflation.
The bank reiterated it would continue its monthly €30bn (£25.9bn) bond purchases until at least September, or until the council could see “a sustained adjustment in the path of inflation.”