ECB Highlights Monetary Policy Uncertainties

The European Central Bank (ECB) has expressed concerns over the current stance of monetary policy, indicating it may no longer be sufficiently restrictive. This uncertainty is heightened by external factors, notably the inflationary pressures anticipated from escalating US tariffs and potential retaliatory actions.

External Pressures and Inflation Risks

"The combination of US tariffs and retaliation measures could also pose upside risks to inflation, especially in the near term," the ECB report emphasized. Additionally, the bank pointed out that a significant increase in fiscal spending on defense across Europe could disrupt the ongoing disinflation process.

Prudence Over Gradualism

While advocating for caution in adjusting interest rates, the ECB clarified that prudence does not equate to a slow or gradual approach. The bank remains prepared to act swiftly if the situation demands, keeping all options on the table.