ECB Official Warns of Tariff-Induced Economic Slowdown

Yannis Stournaras, a prominent member of the European Central Bank (ECB) Governing Council and Governor of the Bank of Greece, has issued a stark warning regarding the potential economic repercussions of US President Donald Trump's expansive tariff policies. Speaking to the Financial Times, Stournaras highlighted the risk of a "negative demand shock" sweeping across the eurozone, which could markedly dampen the region's growth prospects.

Implications for Inflation and Economic Policy

Stournaras pointed out that the anticipated economic deceleration might drive inflation rates below the ECB's coveted 2% target. This concern is compounded by the already "modest" economic forecasts for the region. Despite recent indications from the ECB about a possible halt in rate cuts, Stournaras emphasized that "tariffs are definitely a deflationary measure," underscoring the unique challenges posed by the current global trade environment.

Global Uncertainty and Growth Projections

The ECB official also shed light on the "unprecedented" levels of uncertainty engendered by US trade actions. He estimated that the eurozone's growth could suffer a decline of up to one percentage point as a direct consequence of these measures, painting a grim picture of the potential economic fallout.