Capital Economics: Limited Impact from Trade Agreements, ECB Expected to Hold Steady

ChainCatcher reports that despite news suggesting the EU is close to reaching a trade agreement to limit US tariffs, Capital Economics economist Andrew Kenningham points out that the European Central Bank is likely to remain cautious.

The Wall Street Journal previously reported that Brussels is considering accepting a plan under which most EU exports to the US would face a 15% tariff—lower than the 30% previously threatened by Trump, but still significantly higher than the current rates on European goods.

Kenningham analyzes that this move will have a limited impact on the eurozone economy. This means that ECB President Lagarde and her colleagues, who are currently holding a policy meeting in Frankfurt, are unlikely to change their policy stance as a result. “While the agreement would prevent a destructive escalation of trade barriers, its actual impact would be slightly more negative compared to the economic assumptions underlying the ECB’s baseline forecast,” Kenningham stated.