A senior official said the European Central Bank must be ready to reduce borrowing costs to "slightly below" 2%, as global trade wars have the potential to delay consumer prices.
“If I look at the economy - the shock we face and the uncertainty of growth - there might be some support.
He said that could mean lowering the central bank’s main deposit facilities tax rate to “slightly below 2 percent.” Since June, the ECB has dropped from 4% to 2.25%.
According to Reuters, the market currently expects the ECB to reduce borrowing costs by a quarter in June and reduce borrowing costs in the second half of the year to raise the deposit facility tax rate to 1.75%. Some economists predict that percent banks may have to raise interest rates again in 2026.
Wangshi said he was “not shocked” when he looked at market forecasts. "The way I read is that around the end of 2025, we may have moderate support," he said.
Wangshi's comments favor further cuts, which signaled a markedly different position from his relative hawkish stance in the past. In February, he told the ECB that the ECB should not “dream to 2% (interest rate) without considering it”.
His remarks also mean that among the 26 ECB governing committee members who determine interest rates, Ecb Hawk Isabel Schnabel appears to be increasingly isolated. Schnabel said in a speech in the United States on May 9 that the global trade war threatened to push inflation in the euro zone, limiting rooms for further lowering interest rates.
Explaining his changes, Wonshi said that since the extensive tariff announcement issued by U.S. President Donald Trump on April 2, the eurozone has posed a clear "inflation risk" and an additional threat to economic growth.
The euro zone inflation rate was above 2.2% in April, and although economists say factors such as lower oil prices have not yet been conquered by consumer prices, the euro zone inflation rate was 2.2% in April.
Wangshi also pointed out that after the so-called liberation day, Trump announced high tariffs on most U.S. trading partners, including a 20% tax on almost all EU exports. These "reciprocal tariffs" were reduced to 10% on April 9 for a total of 90 days to negotiate.
Wangshi believes that the stronger the euro, the cheaper the import of European consumers, may slow inflation. He added that the outlook for cheap Chinese goods could have similar effects due to a sharp drop in energy prices since early April.
Wunsch said Germany's new 1 trillion euro debt-funded spending plan strengthens its military and public infrastructure and will not offset the inflationary barriers of the tariff war in the near term.
"French policy takes time to get support," he said. He believes the eurozone could suffer a "negative (economic) shock in the short term" followed by a "positive shock in 2026 and 2027".
The governor of the Belgian central bank currently opposes an overly hawkish position and does not cut even a bigger point in the foreseeable future. Wangshi also stressed that he currently "does not plead for" to reduce interest rates below 2%, but I am willing to consider this possibility".
European Commission President Ursula von der Leyen said this month that the EU remains "fully committed to the outcome of negotiations with the United States" but the group is preparing for "all possibilities."
Vance warned that Trump's "reciprocal tariffs" hit 10% even in the UK-US trade deal.
"That's big," Wangshi said, adding that it's likely that "the U.S. is growing lower, with higher prices and lower value chains."