Walk through the atrium with guests and attendees during the IMF/World Bank Group spring meeting held at IMF Head Office in Washington, DC on April 24, 2025.
Jim Watson | AFP | Getty Images
After years of domination by the pandemic, supply chains, energy and inflation, there was a new topic that puts the World Bank agenda this year and tariffs, the International Monetary Fund’s spring meeting.
The IMF set the tone by kicking off the week with the release of its latest economic forecasts that cut growth outlook in the US, UK and many Asian countries. Economists, central bankers and politicians are engaged in panels and behind the scenes talks, but many are trying to resolve whether trade tensions between China and the US are being cooled.
Speaking this week, European Central Bank policymakers spoke with this week have spread a tremendously trending tone, indicating that interest rates continue to fall and there is little risk of rising eurozone inflation. However, it highlighted all high levels of uncertainty, the need to maintain monitoring data, and the high risks to growth outlook. This is also reflected by Governor of the Bank of England, Governor Andrew Bailey in an interview with CNBC on Thursday.
These were some of the main messages from ECB members this week.
Christine Lagarde, Chairman of the European Central Bank
On inflation and monetary policy:
“We are heading towards our (inflation) goal during 2025, so the firing process is very on track and we are approaching completion, but we are shocked and wet with GDP.
“The net impact on inflation will depend on what measures Europe will ultimately take. We will then need to consider Germany’s financial push through defence investments by the infrastructure fund.”
“We’ve seen a series of movements, you know, the announcements (of US tariffs), then the suspension, and some exemptions. So we have to be very careful… we’re going to pause, but we’re going to be extremely dependent on data.”
Market movements:
“When we made the predictions, we predicted… the dollar would be grateful, the euro would depreciate. That’s not what we saw. And there were some counterintuitive moves in different categories.”
“It was clearly shocking that the German market is being actively shocked by the programme soon, with programs being introduced by the German government due to their commitment to a large fund for infrastructure development.”
Klaas Knot, Chairman of the Netherlands Bank
Regarding uncertainty about customs duties:
“Looking back at the last 14 years, I think on the first day of the pandemic, it was uncertainty comparable to what we have now.”
“In the short term, it is clear that the uncertainty created by the unpredictability of tariff actions by the US government serves as a strong negative factor for growth. Essentially, uncertainty is like a tax without income.”
Regarding the impact on inflation:
“In the short term, growth will be low. Inflation will probably be low. We are also looking at the euro as energy prices are falling. So it’s clear that in the short term, we’ll accelerate disinfection along with uncertainty in the negative factors.”
“However, in the medium term, the outlook for inflation is less clear. I think there are still these negative factors, but in the medium term, there may be retaliation. In other parts of the world, it may be more inflation than in the US.
Two more ECB rate reductions in June and market pricing for 2025:
“I’m completely open-minded. I think it’s too early to already take the position in June. Is it another cut? It depends entirely on those predictions.”
“We need to look at a more structured analysis of the impact on our previous inflation profile. Only then can we say whether the market is fair or whether I am not.”
Robert Holtzmann, Governor of the National Bank of Austria
Regarding the need to wait for more data and news about customs:
“We haven’t seen this uncertainty for years now…unless uncertainty is born from the right decisions, we need to restrain many decisions.
“Before looking at the data in detail, the question is what kind of political decisions will be made. Are there any increase in tariffs? Is there a strong increase in tariffs?
ECB’s April fee reduction:
“I think there’s a wide consensus (on the rate), but of course, people are different in margins.”
“My assessment is that it is not yet clear how much (customer tax) measures are in place at this point, as prices may have risen due to European measures. Without measures, price pressure could be lowered.
Regarding the direction of interest rates:
“If the recent noise regarding the arrangement (in trading) is true, then in this case it’s very likely that it’s heading towards the top when it comes to prices. But this could change with different decisions and the consequences.
“There could be further cuts this year, but that number is still unresolved.”
Marti Cazarks, Governor of the Bank of Latvia
Regarding opportunities from customs:
“With all this uncertainty and vulnerability, this is also an opportunity for Europe.”
“It’s time to grasp all the aspects of Europe being an economic superpower and truly becoming a full-fledged political and geopolitical superpower. This requires all decisions that have not been fully implemented in the past.”
“This requires political will, political will, to make these decisions, to strengthen the European economy and to assert its place in the global world.”
Market response to tariffs:
“So far, it seems relatively orderly… but when you look at the outflow to Europe, if the financial markets are working more or less well, we don’t see spreads explode or anything.”
“However, from a macro-scenario perspective, this uncertainty is very high in the sense that multiple scenarios and their odds are very similar to baseline (customer) scenarios given the likelihood of outcomes.”
