Despite Trump’s return, the European Central Bank will move forward with plans to cut interest rates

European Central Bank officials, including President Christine Lagarde, said that a decline in the target level of 2% is still expected during the current year, which allows them to ease monetary policy to contribute to reviving the region’s faltering economies.
This came in statements during their participation in the World Economic Forum in the resort of Davos, Switzerland.
The European Central Bank’s plans to move forward appear to support the resilience of interest rate cuts in the face of the early tremors in US economic policy resulting from the return of US President Donald Trump to the White House.

Trump threatens to impose additional tariffs

Bloomberg News Agency reported that Trump’s postponement of implementing his threat to impose additional duties on all American imports, including those coming from Europe, does not mean that the risks of Trump’s economic and trade policies have disappeared.
On Tuesday, Trump described the European Union as “very bad” for the United States on trade.
But the European Central Bank will not react to such statements unless there is concrete action on tariffs.
Moreover, monetary policymakers at the central bank, based in Frankfurt, Germany, are optimistic that any repercussions on prices will be limited, allowing them to continue cutting interest rates by a quarter of a point each time they meet.

The impact of Trump’s policies on inflation

“I am vigilant but not worried about inflation, including the impact of Trump’s policies,” François Villeroy de Gallo, Governor of the Central Bank of France and a member of the European Central Bank’s Governing Council, said in an interview with Bloomberg Television. “There is a reasonable consensus that we will continue to work in every meeting, which is “What we have practiced successfully since last September,” he said, referring to European interest rate cuts over the past months.

It is possible that the European interest rate will be reduced by a quarter of a percentage point during the Board of Governors meeting on January 30, which will be the fourth reduction since last September, and the key interest rate currently stands at 3%.

Interesting phenomena

Lagarde admitted there would be “interesting phenomena” to watch, including exchange rates, but if tariffs on goods entering the US stoke prices there, that would be a major concern for the US Federal Reserve.
“Here will be the first and main consequences,” she told CNBC on Wednesday. Noting that it expects the inflation rate to continue to decline in Europe.
“We are not overly concerned about exporting US inflation to Europe,” she said.