Growth, inflation… How will the Fed and the ECB react to Trump taxes?

Free tribune how do the ECB and the Fed face an unprecedented uncertainty ?, Wonders our columnist Bastien Drut, head of studies and strategy at CPR Asset Management (Amundi), writer and associate professor at CNAM. © Alex Kraus/Bloomberg via Getty Images – Christine Lagarde, President of the European Central Bank (ECB) safeguarded Receive interest rate alerts The indicators of uncertainty linked to economic policy recently reached unpublished levels, largely due to the commercial policy carried out by the new American administration. Indeed, Donald Trump has implemented significant customs duties (taxes) against his main business partners (Canada, China, Mexico) and threatens to do the same with other countries (in particular Europe). This context of uncertainty weighs on the consumption and investment decisions of households and businesses. This clearly marked the latest monetary policy committees of the European Central Bank (ECB) and the Fed. Jerome Powell, the boss of the Fed,, for example, described the uncertainty of “unusually high” and Christine Lagarde described him as “huge”. The latter even said: “the risks are everywhere” and “the situation radically changes from one day to the next”. This sharp rise in uncertainty caused a revision of the decline in economic growth forecasts of the two institutions for this year and for next year. Read also: Bourse: The CAC 40 cautious, the Fed much more pessimistic about growth and inflation The Fed and the ECB must lower the rates against the slowdown in growth or rise to fight against inflation? One of the main questions faced by the ECB and the Fed is to measure the impact of customs duties decided by Donald Trump on economic activity and inflation. This can actually put the central banks before a dilemma: should we soften monetary policy to react to a deterioration in economic activity or tighten it to react to an increase in inflation? During the FOMC (monetary policy committee) of March 19, Jerome Powell was a little more advanced on the subject by affirming that the central scenario would be an increase in customs of customs. By insisting that it would be very difficult to analyze the inflation figures this year. Conversely, Powell stressed that a deterioration of the activity could translate “fairly quickly” into an increase in the unemployment rate because the US labor market is currently characterized by a low hiring rate. The signals sent by Powell therefore lead to believing that the Fed is not in an emergency to make a drop in guiding rates but any deterioration of hard figures will increase the probability. Read also: Growth and inflation: the ECB must “ensure to find the happy medium on the rates” The ECB and the Fed should lower their rates in the event of significant customs of customs duties from the ECB, philosophy is significantly the same. During her passage before the European Parliament, Christine Lagarde said that an increase in customs duties of 25 points decided by Trump on imports of European products would amputate the growth of half a point in the first year and that part of the loss of activity would be permanent. With regard to inflation, the estimated effect would be a temporary increase of half a point and a residual effect then. Ultimately, it therefore seems that the ECB and the Fed would react to significant customs of customs duties by moving towards a relaxation of their monetary policy. >> Buy and sell your actions at the right time thanks to Momentum, the premium investment letter of capital based on technical, economic and financial analysis. Momentum has properly anticipated the trajectory of economic growth and inflation, as well as that of the key rates of the ECB and the Fed. Our selection of stock market shares experienced a better route than that of the CAC 40. And thanks to our partnership with the Salon de la Technique Analysis of March 28, 2025, take advantage of -30% now on the price of an annual subscription! Receive our latest news every day, selecting the main news of the day. (tagstotranslate) rate of int u00e9r u00eat

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