Huge uncertainty". "Uncertainty everywhere". "Uncertainty in investment". The President of the European Central Bank (ECB), Christine Lagarde, has repeated the same word over and over again to try to define the current economic context in which geopolitics plays a fundamental role. Due to the trade war unleashed by U.S. President Donald Trump, but also due to the rearmament plan that Europe is already working on in response to the threat from Russia.
Regarding the first issue, Lagarde has pointed out not only that it generates that "uncertainty" but also that it is negative for growth. A trade war harms the economy and "reduces investment". This is something that is clear in Frankfurt (where the ECB headquarters is located), in Brussels, and even in Washington. But Trump seems not to care too much.
As for Defense spending, which is one of the points that heads of state are also discussing this Thursday in the European capital, Lagarde has stated that it "contributes to growth". It also contributes to inflation as it boosts demand, the President continued when asked about Europe's military plans.
Regarding monetary policy itself, the European Central Bank fulfilled what was expected: the fifth consecutive interest rate cut, with the price of money set at 2.5%. In this way, the cycle of cuts accumulates a reduction of 150 basis points, a trend that is now not clear whether it will continue.
"Monetary policy is taking a considerably less restrictive stance, as interest rate cuts are reducing the cost of new credit for businesses and households, and loan growth is picking up," states the document announcing the reduction, which includes "a change" in vocabulary compared to previous documents "that has a certain significance," Lagarde acknowledged.
This already provides a clear clue for analysts and experts in monetary policy, but the ECB President wanted to be clearer for those who are not: "If the [economic] data suggest that it is best to lower, we will lower interest rates, but if the data suggest that it is best not to lower them, we will pause." Because, indeed, "uncertainty" makes it very difficult to know what the situation will be on April 17, the date of the next meeting.