O European Central Bank (ECB) You should avoid cutting your main interest rate at the April meeting as a form of caution, given the increase in defense spending and the highest US tariffs, said Austria BC governor Robert Holzmann.
The two factors threaten to maintain inflation in the euro zone above the target of 2%
Although investors expect a reduction in loan costs, Holzmann told Wall Street Journal that would not support a new cut in the current conditions.
“It is necessary to be cautious when reducing the interest rate,” he said, who often prefer a higher rate than most of his colleagues. He was the only one not to support the cut at this month’s meeting.
It grew at a much slower pace than the US in 2023 and 2024.
However, with them and weakening growth in Europe.
The prospects for the euro zone now seem better from 2026, largely due to a change in Germany, the largest member of the area.
Legislators recently approved a Civil and Defense Investment Package to boost the economy and reduce US military dependence.
Holzmann fears that this increase in spending, added to similar initiatives in other parts of Europe, can press inflation if industrial capacity does not track growing demand.
“If inflation resurfaces, we will lose our credibility,” he warned.
Although most policy training agree that new US tariffs would weaken growth in Europethe impact on inflation is still uncertain.
If European governments do not retaliate, prices may cool. However, new European US imports would raise prices for consumers.
Para Holzmann, Higher tariffs represent an inflationary threat.
O Trump president He announced that an increase in tariffs will be made on April 2. Holzmann pointed out that any answer should be “prudent” and aim more political than economic damage.
“The US economy was heading for a soft landing, which is not typical after high inflation. But what he has achieved in just a few months was to destroy confidence.”
