VIENNA (Reuters) – It is “conceivable” that the European Central Bank will cut interest rates by 25 basis points at its next rate-setting meeting this month, according to ECB policymaker Robert Holzmann. However, he noted that a rate cut of more than 25 basis points is not yet decided upon and depends on the final data received.
Holzmann, who heads the Austrian National Bank, stated that the general expectation of U.S. President-elect Donald Trump’s potential introduction of sweeping import tariffs could put upward pressure on inflation expectations. He believes that Trump’s policies will likely drive up inflation due to the rising relative prices of imported goods and potential government spending to mitigate the effects.
According to Holzmann, tariffs have a dual effect. Firstly, they make everyone poorer due to the increase in relative prices, and secondly, attempts will likely be made to mitigate these effects through government spending, which will put additional pressure on the budget. This is likely to drive up inflation.