- The curtain is rising on the new world order
- America is behaving very strangely as an ally
- European countries would be stronger if they eliminated non-tariff trade barriers
- We can do better on growth, productivity and debt
- Euro zone inflation is under control
- Tariffs will have little impact on inflation
- The German economy will be more affected by the tariffs than the French economy.
- Monetary policy is in good shape
ECB President Christine Lagarde spoke at a discussion panel at the World Economic Forum in Davos. He highlighted the transition to a new unprecedented era, a “new world order”, where global cooperation, free trade and American leadership are being replaced by something more fragmented.
He also talked about the Eurozone economy and how eliminating non-tariff trade barriers would make European countries stronger. A “non-tariff barrier” is a rule, regulation or bureaucratic hoop that a company must jump through to sell its goods in another country.
Lagarde reiterated that inflation is under control in the eurozone and that the tariffs will have a modest impact on inflation. He also said that the German economy would be more affected by the tariffs than the French economy because the German economy is more dependent on exports.
Finally, he described monetary policy as being in good shape, essentially reiterating his neutral stance as they “wait and see” how things develop in the next months. As a reminder, the ECB brought the policy rate down to 2.00% which is right in the middle of their estimated neutral rate range of 1.75%-2.25%. Inflation has been under control for many months.
