Euro Zone Faces Stagnation Amidst Trade Tensions

Euro zone's economic growth could be severely impacted by U.S. trade tariffs, potentially stagnating the economy and lowering inflation. The European Central Bank's previous estimates were too conservative, and updated assessments are necessary. Policymakers may consider additional interest rate cuts as energy prices decline and market uncertainties rise.

The Euro zone's economic stability is increasingly threatened by the recently imposed U.S. trade tariffs, sources reveal. The European Central Bank's earlier predictions severely underestimated the potential downturn, prompting calls for updated figures ahead of the April 17 policy meeting.

Policymakers are poised for discussions on the potential economic fallout, especially as the bloc's anticipated 1% growth could be nullified by stagnation. Sources indicate that energy prices, currency strength, and rising bond yields are contributing to downward pressure on inflation, supporting arguments for imminent interest rate cuts.

While an interest rate reduction is almost certain, speculation about the ECB reigniting its bond purchasing program is premature. Despite market volatility, sources confirm that liquidity remains sufficient, and the monetary strategy, including balance sheet shrinkage, will persist unchanged.

(With inputs from agencies.)