ECB's Lagarde: rate cuts remain in doubt due to trade uncertainty

Christine Lagarde, President of the European Central Bank, stated on Wednesday that it is impossible to plan further rate cuts due to risks associated with trade relations between the US and the EU. Given the current economic outlook, the regulator will make decisions based on incoming data.

Analyzing the potential impact of trade tensions, ECB experts have come to conclusions causing serious concern. If 25% duties on European goods are imposed, the eurozone's economic growth may shrink by 0.3 percentage points. The situation is going to get worse if the EU announces retaliatory steps. This would cause the economy to fall by another 0.2 percentage points.

Assessing inflation risks, Lagarde noted their contradictory nature. On the one hand, the EU's countermeasures and the euro weakening can boost inflation by 0.5 percentage points. On the other hand, trade restrictions could decelerate economic growth, which would have the opposite effect on prices.

Considering all the factors, the ECB cut the rate to 2.5% this month. However, predicting next moves is complicated by uncertainty in the global economy.