ECB Vice-President Stresses Prudence Amid High Uncertainty

European Central Bank (ECB) Vice-President Luis de Guindos emphasized the necessity of being "extremely prudent" in monetary policy decisions due to an "extraordinarily high level of uncertainty." The ECB is actively exploring unconventional risks and employing a wider array of tools to assess the financial system's resilience.

Potential Economic Impacts of Trade Tensions

De Guindos highlighted that escalating trade tensions could lead to a depreciation of the euro, higher import costs, and increased commodity and energy prices, potentially driving inflation upward. Additionally, he pointed out that rising defense and infrastructure spending could further exacerbate inflationary pressures.

Contrasting Risks to Inflation

On the flip side, the ECB Vice-President noted that weaker demand for euro area exports and sluggish growth might result in downward pressure on prices. Despite these contrasting risks, De Guindos reassured that most indicators suggest inflation is moving in the desired direction.