ECB’s Stournaras Warns Higher Inflation from U.S. Tariffs Could Delay Monetary Policy Normalization
April 8, 2025, 4:07 AM PDT — Yannis Stournaras, a key policymaker at the European Central Bank (ECB) and governor of the Bank of Greece, cautioned Tuesday that rising inflation spurred by U.S. President Donald Trump’s aggressive tariff policies could stall the eurozone’s path to monetary policy normalization. Speaking at the Greek central bank’s annual shareholders’ meeting in Athens, Stournaras highlighted the risk of a global trade war, triggered by Trump’s April 2 rollout of a 10% baseline tariff on all imports—escalating to 34% on China and 25% on Canada and Mexico—as a potential disruptor to the ECB’s plans to ease its restrictive stance.
“Any further resurgence in inflation or inflation expectations could delay or even halt the process of monetary policy normalization, worsening financial conditions and growth momentum,” Stournaras said, according to reports from MarketScreener and Yahoo Finance. He warned that the tariffs, which Trump threatened Monday to hike to 50% on Chinese goods by Wednesday unless Beijing capitulates, could ripple beyond the U.S. and Europe, slowing global trade even in countries spared from direct duties. “This isn’t just a U.S.-Europe issue—everyone feels the pinch,” he added, pointing to a $6.6 trillion wipeout in global market value since the tariff shock, per The Wall Street Journal.
The ECB has been unwinding its tight policy since June 2024, cutting its deposit facility rate from a 4% peak to 2.5% by March 12, 2025, per its latest meeting—a nod to inflation nearing its 2% target. Stournaras, a dovish voice on the Governing Council, had signaled in November 2024 that this target could hit by early 2025, per FXStreet. But Trump’s tariffs, now in full swing, threaten that timeline. ECB staff project headline inflation at 2.3% in 2025, dipping to 1.9% in 2026, per a March 5 update—yet Stournaras fears tariff-driven price hikes could push these figures higher, especially if second-round effects like wage demands kick in.
Economists see a dilemma brewing. Goldman Sachs’ Sven Jari Stehn, cited by Euronews, estimates a 25% U.S. tariff on Europe could cut eurozone GDP by 0.5 points while lifting inflation by a similar margin in year one—assuming EU retaliation. Stournaras aligns with this, noting that while growth takes a hit, anchored inflation expectations might still allow rate cuts, per posts on X from early April. But a “large and broad-based rise” in expectations, as Stehn warns, could force the ECB to pause or tighten, a view Stournaras now echoes as China’s 34% counter-tariffs and market chaos amplify the stakes.
As Trump digs in—dismissing Elon Musk’s weekend plea to withdraw duties—and markets claw back losses (Nikkei up 6% Tuesday, per NPR), Stournaras’s caution underscores a pivotal moment. The ECB’s next meeting looms, with a rate cut expected—but his warning suggests that normalization, a gradual shift to neutral rates around 2%, could falter if Trump’s trade war reignites inflation. For now, the eurozone braces for impact, caught between growth fears and price pressures in a tariff-torn world.
