The ECB Interest rates lower, to 2.25%, and completes more than half of the road map that Frankfurt drew to make its monetary policy more flexible. Undoubtedly, the commercial war unleashed by the US has sprayed the economic scenario on which this plan was based. However, the Central Bank now has even more arguments to stay faithful to its initial strategy. Nothing has to fear in regard to inflation control, when the IPC of the Eurozone – 2.2% in March – is aligned almost to the millimeter with the stability objective of the ECB, without visos of deviating significantly.
On the contrary, The weakness of the dollar ensures the lowering of European energy imports. Therefore, the true threat that the commercial war poses to the old continent is focused on GDP growth. And lower interest rates constitute the most efficient resource to avoid strong deceleration, or even a recession. Moreover, the rate drop is the necessary response to the appreciation that the euro shows and that threatens to carry its crossing against the dollar to 1.20 green tickets.
The community foreign sector is already too penalized by the 10% reciprocal tariffand a tax of 25% in the case of steel and aluminum that the US applies. It cannot also afford to suffer the punishment of an adverse exchange rate that subtracts competitiveness, while damaging growth and even remains negotiating capacity to the EU in front of a Donald Trump even capable of crossing all the red lines – as it shows its last attack against the Fed. Frankfort thus gives an adequate response to a crisis of still unpredictable effects.
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