European Central Bank Governing Council Member Villeroy: Trump's policies may push up U.S. inflation and could lead to another rate cut in the summer
European Central Bank Governing Council member Villeroy stated that the protectionist policies of the Trump administration could lead to rising inflation in the United States, but would not exacerbate inflationary pressures in Europe. He supports interest rate cuts in the summer, believing that the economic differences between the U.S. and Europe will influence monetary policy. Villeroy emphasized that the impact of trade policy on the Eurozone is limited, and that the European Central Bank should utilize the current period of price stability to cut interest rates in order to address the global economic slowdown
According to the Zhitong Finance APP, François Villeroy de Galhau, a member of the European Central Bank's Governing Council, pointed out in an interview on Tuesday that if the Trump administration implements protectionist policies, it may trigger a rebound in U.S. inflation, but inflationary pressures in Europe will not intensify as a result. This judgment provides a basis for his support of the European Central Bank's position on cutting interest rates this summer.
Villeroy analyzed that the differences in economic performance between the U.S. and Europe will directly affect the direction of monetary policy. He stated: "The trade barriers of the Trump administration may put pressure on U.S. prices, but inflation in Europe has been substantially controlled, creating conditions for further easing of monetary policy." His remarks align with the European Central Bank's operational path since June 2024—over the past 11 months, the European Central Bank has cumulatively lowered the benchmark interest rate seven times.
The market is currently closely watching the two monetary policy meetings scheduled for June 6 and July 24. Although some officials support continuing to cut interest rates in June, there are differences regarding the pace of subsequent policies: doves believe that the window for sustained inflation decline should be seized to accelerate easing, while the cautious faction warns of the need to guard against geopolitical risks and potential price rebounds caused by rising wages.
It is noteworthy that Villeroy particularly emphasized the impact of trade policy on the Eurozone. He pointed out that if tariffs are implemented during Trump's term, although they may have spillover effects on the European economy through trade channels, the direct risk of imported inflation is limited. This judgment has become a key policy consideration for the European Central Bank, distinguishing it from the Federal Reserve—current market expectations generally anticipate that the Federal Reserve will maintain high interest rates due to domestic inflation resilience, while the European Central Bank has greater room for easing.
As one of the actual policymakers of the Eurozone's monetary policy, Villeroy's statements reflect the core logic of the decision-making body: ensuring inflation while utilizing the current window of price stability to buffer the impact of global economic slowdown on the Eurozone economy through interest rate cuts. If this policy direction is realized in the June meeting, it will mark the European Central Bank's eighth consecutive adjustment of interest rates, further consolidating its position as the most aggressive easing cycle among major central banks globally
