ECB’s Klaas Knot sees US tariffs curbing inflation and economic growth in near term

European Central Bank (ECB) Governing Council member Klaas Knot believes that uncertainty caused by US trade policy will curb inflation and GDP growth in the EU in the near term. At the moment, consumers are postponing spending amid concerns about a higher unemployment rate and weaker economic growth, the official notes. 

According to him, in the short run, US import tariffs will weigh on the European Union's GDP recovery, but will also push down the inflation rate. However, the medium-term impact of US trade policy on the consumer price index is somewhat more ambiguous and has to be monitored closely by the ECB, adds Klaas Knot. 

Inflation is expected to reach the regulator’s target of 2% this year. Still, prices could rise due to the EU's retaliation and increased fiscal spending, Bloomberg says.

The way Donald Trump’s import duties affect the economy of the eurozone countries will determine the direction of the ECB monetary policy. At the moment, analysts polled by Bloomberg and market participants are predicting two rate cuts before the end of the year.