MNI BRIEF: Tariffs Could Add 50BP To Inflation - ECB's Lagarde
MNI (LONDON) - A trade war with U.S tariffs would make the eurozone's price outlook "significantly more uncertain," potentially adding 0.5 percentage point to inflation, European President Christine Lagarde told the European Parliament's ECON committee.
In the near term, EU retaliatory measures and a weaker euro exchange rate "resulting from lower U.S.demand for European products" could lift inflation by around half a percentage point Lagarde said. The effect would ease in the medium term due to lower economic activity dampening inflationary pressures, she said. (See MNI INTERVIEW2: Trump Stagflationary For EZ-ECB's Wunsch )
"Let me stress again that these estimates are subject to very high uncertainty given that the impact of tariff increases may be non-linear, for instance due to a significant reconfiguration of global supply chains. Of course, the high level of policy uncertainty requires us to remain vigilant and ready to act to protect price stability," she said.