Dutch bank: Tariff threats could trigger further interest rate cuts by the European Central Bank

Jinshi data on January 30th, the Dutch Central Bank said that the European Central Bank is almost certain to cut interest rates by 25 basis points today, reducing the deposit interest rate from the current 3.00% to 2.75%. What happens next largely depends on the tariff policies of the new U.S. government and how they affect trade and inflation. Currently, there is no reason for European Central Bank officials to propose an easing stance, and most officials seem to be taking a wait-and-see attitude, which is logical. However, if the European Central Bank indicates that its views on the economic impact of tariffs are forming, this may herald a more dovish stance. U.S. tariffs will have a negative impact on the euro area's economy and cause deflation. This is because the direct upward impact of tariffs on inflation is moderate, while the indirect downward impact of global trade and commodity price declines on inflation could be significant. This is also a key factor in our belief that the European Central Bank's policy interest rate will eventually fall to 1%.