ECB Official Warns U.S. Trade Measures May Impact Eurozone Inflation

According to Odaily, European Central Bank Executive Board member Fabio Panetta has expressed concerns that U.S. trade measures could negatively affect Eurozone inflation in the short term by hindering global economic growth. On Tuesday, Panetta stated that the impact might lead to a decrease in Eurozone inflation rates, as real interest rates in the region have risen and the euro has appreciated following the U.S. announcement of tariffs. Panetta noted that these trade measures might shift resources from high-productivity sectors to lower-productivity ones, potentially causing inefficiencies similar to those seen in the 20th century. This contraction effect could result in a prolonged decline in global growth rates. Since U.S. President Donald Trump announced the tariffs, the strengthening of the euro has been an unexpected development for policymakers, who had anticipated a depreciation that would increase import costs and, combined with EU countermeasures, potentially drive up inflation. Panetta highlighted that the Eurozone has benefited from safe-haven capital inflows, leading to the euro's appreciation and a decrease in nominal bond yields. He also suggested the possibility of trade diversification leading to a gradual transition from a U.S.-dominated global system to a more multipolar one, where multiple currencies compete for reserve status.