European Union Retaliates Against US Tariffs, Markets Await US CPI Data
Tariffs of 25% on European Union steel and aluminium imports to the US came into effect earlier today with the US administration stressing that there would be no exceptions or exemptions. The euro lost ground against the US dollar on Wednesday morning after recording gains for three consecutive days.
Later in the day, the US CPI inflation report for the month of February will be published. Inflation data plays a role in the Federal Reserve’s monetary policy decisions. In Canada, the country’s central bank will announce its interest rate decision.
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EU Retaliates Against US Tariffs
The US imposed 25% tariffs on steel and aluminium imports from the European Union (EU). The European bloc announced that it would retaliate with countermeasures to protect its consumers, starting in April. In the meantime, the US administration said that it would not increase tariffs imposed on Canadian imported metals to 50%, despite President Trump’s comments on Tuesday.
Commenting on US tariffs, the European Commission head, Ursula von der Leyen, said that the trade restrictions are unjustified, adding that “it is not in our common interest to burden our economies with tariffs.”
ECB President Lagarde Comments On Monetary Policy
The European Central Bank (ECB) head, Christine Lagarde, said that the bank’s policy must be set so inflation converges to the target of 2%. Lagarde noted that “in case of large shocks, risk grows that inflation becomes more persistent.”
Commenting on tariffs and trade wars, the ECB’s president said that “trade fragmentation is likely to lead to larger, more disruptive relative price changes.” Lagarde said she could not provide any forward guidance but stressed that the ECB “must be clear about reaction function.”
BIS: Global Market Uncertainty, European Defence Could Boost Growth
The Bank for International Settlements (BIS) said in a report that market volatility and elevated uncertainty as a result of President Trump’s tariff policies could hurt economic growth, although a recession does not seem probable at the moment.
The BIS, which some analysts call as the “central bankers' central bank”, said that the new increased European Union (EU) defence budget could boost the bloc’s economy even though Germany and France, two of its largest economies, experience sluggish growth.
BIS analysts note in their report that tariffs will be “doubly unhelpful”, adding that the global economy is likely to experience a “soft landing.”
BoJ Governor Worried About Uncertainty
The Bank of Japan (BoJ) Governor Kazuo Ueda said that he is “very worried about uncertainty over overseas economy, prices.” Ueda’s comment comes on the back of recession talks in the US and tariffs being imposed on Chinese, Mexican, Canadian and EU products.
The BoJ’s head noted that “underlying inflation still remains below 2%” adding that Japan’s central bank will be “ready to conduct bond-buying operation nimbly in exceptional cases when long-term rates make irregular moves.”
The BoJ’s governing board will convene on March 18-19th to decide on interest rates.
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