The European Central Bank is widely expected to lower interest rates at its meeting next week, but investors will be more interested in any clues on what an escalating global trade war means for monetary policy later in the year.
Markets have moved to price in a faster pace of rate cuts as Donald Trump’s tariff blitz intensified. Even after announcing a 90-day pause on tariffs for countries other than China, traders are betting on three quarter-point reductions this year with the first coming on Thursday.
Greece’s central bank governor Yannis Stournaras — a member of the ECB’s rate-setting council — warned in an interview with the Financial Times this week that a trade war would expose the currency bloc to a large “negative demand shock” that would create significant deflationary pressures.