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The European Central Bank reduced its main interest rate by a quarter of percentage on Thursday, citing increasing trade tensions after the prices of US President Donald Trump sparked a world trade war.
While the 20 countries that use the euro have constituted “resilience against world shocks”, the “(economic) growth prospect has deteriorated due to the increase in trade tensions,” the ECB said in a statement.
The central bank is one of the many global economic and financial players to warn that prices could weigh on economies and injure everyone, from large companies to ordinary people. Similar warnings have been issued by the International Monetary Fund, the World Trade Organization, the President of the American Federal Reserve Jerome Powell and others.
Addressing journalists, the president of the ECB, Christine Lagarde, said: “Disturbances in international trade, financial market tensions and geopolitical uncertainty weigh on commercial investment. While consumers become more cautious about the future, they can resume spending. ”
The ECB’s rate is reduced to 2.25%, which was widely expected, is the seventh in the past year.
Yael Selfin, chief economist of the KPMG consultation, said that the trade war – which presented a burst of prices, breaks, new prices and more delays – could cause a stack of products as the trade flows are scolded.
“The evolution of commercial disturbances could create a global overabundance of manufactured products, which could see the prices of goods falling into a deflationary territory this year,” added Selin.
Unlike the ECB, the US federal reserve held stable rates at its last political meeting in March, and those responsible, including President Jerome Powell, suggested that commercial uncertainty would cause rates out of all.
On Wednesday, Powell told an audience of Chicago that Trump’s movements represent “very fundamental policy changes” and gave its most starkeeper warning to this day on the effect of prices on the American economy, the largest in the world.
Trump contrasts on Thursday the approach of the two central banks on social networks, tearing Powell for detention rates.
“Jerome Powell of the Fed, who is still too late and bad, published yesterday a report which was another, and typical,” Mess! “” Wrote Trump. “Powell’s termination cannot come quickly enough!”
But Lagarde, during his press conference on Thursday, joined Powell: “I have a lot of respect for my estimated colleague and friend Jay Powell.”
It has added that it is imperative that central banks remain independent of the influence or intervention of the government, noting that any country which wishes to join the euro zone must demonstrate that it can maintain this independence in law and in practice.
“For us, here, the independence of central banks is fundamental,” she said.
This story has been updated with additional information and a context.
