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Minutes of the March policy session of the European Central Bank showed that rate-setters were worried about the impact of the looming trade tariffs and the high uncertainty on the Eurozone economic growth.
"Looking ahead, the point was made that the likely shocks on the horizon, including from escalating trade tensions, and uncertainty more generally, risked significantly weighing on growth," the minutes, which the ECB calls "account", of the Governing Council meeting on March 5-6 showed on Thursday.
"It was argued that these factors could increase the risk of undershooting the inflation target in the medium term," the minutes said.
In March, the ECB cut interest rates for a fifth policy session in a row and lowered the deposit rate by 25 basis points to 2.5 percent, which is its lowest level since February 2023. The bank had signaled a pause in the easing cycle as policy was deemed less restrictive.
On Wednesday, President Donald Trump outlined his "Liberation Day" plan to impose sweeping reciprocal tariffs on U.S. trade partners that included a baseline 10 percent tariff to be levied on all U.S. imports except those compliant with the United States-Mexico-Canada Agreement. The EU countries were hit with a 20 percent reciprocal tariff rate.
"The combination of U.S. tariffs and retaliation measures could also pose upside risks to inflation, especially in the near term," the ECB minutes said.
Policymakers considered the need for caution in policy-setting and communication due to high levels of uncertainty, including in relation to trade policies, fiscal policy developments and sticky services and domestic inflation, the minutes added.
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