Rising inflation due to tariffs may delay ECB monetary policy normalization — Stournaras

Likely higher inflation and global trade tensions following the introduction of tariffs by US President Donald Trump could delay the normalization of monetary policy in the euro zone, says Yannis Stournaras, European Central Bank (ECB) policymaker.

In addition, any further rise in inflation or inflation expectations could worsen financial conditions and economic growth in the region, added the official who is also governor of the Bank of Greece.

According to Reuters, a plunge in global financial markets caused by US tariffs has strengthened the case for another ECB rate cut next week. The current situation also supports the view for faster monetary easing within a year.

Stournaras says that other countries not affected by the US tariffs will still feel the negative impact of a slowdown in international trade, given that global economies are all interconnected.

The head of the Bank of Greece also expressed concern about the situation in his country which may face a drop in demand for local goods and services, while increasing global uncertainty could reduce investor activity.