logo
Tariffs create stagflationary shock in long term, ECB's Knot says

Tariffs create stagflationary shock in long term, ECB's Knot says

Reuters09-04-2025

AMSTERDAM, April 9 (Reuters) - U.S. President Donald Trump's sweeping import tariffs are likely to have a stagflationary impact in the long term, driving up inflation while economic growth stalls, ECB policy maker Klaas Knot said on Wednesday.
"A trade war is a negative supply shock. It is a stagflationary shock," Knot said at a conference at the Dutch central bank in Amsterdam.
"It is likely that as time progresses, the impact will become more inflationary rather than deflationary," Knot added, pointing also to the surge in government spending by Germany and the need to invest heavily in European defence.
Knot said the main task for the ECB would be to assess at what point tariffs start to hit economic activity and business decisions, but he said next week's policy meeting would be too soon to deliver new projections.
Central banks have not had to intervene yet due to the market turmoil caused by the tariff announcements, Knot said.
"Market functioning so far has been preserved," he said.
"The hedge fund sector had already de-levered, they saw this coming. And so they were capable of meeting the margin calls, which was not the case in earlier episodes."

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Trump warns China ‘not easy' as trade talks enter second day
Trump warns China ‘not easy' as trade talks enter second day

Telegraph

time15 minutes ago

  • Telegraph

Trump warns China ‘not easy' as trade talks enter second day

7:34AM Good morning Thanks for joining me. Donald Trump said it was 'not easy' dealing with China but insisted he had received 'good reports' about trade negotiations between Washington and Beijing officials in London. Here is what you need to know as talks enter a second day. 5 things to start your day Apple's AI event falls flat as iPhone maker struggles | Investors sent shares downwards as Apple unveiled minor upgrades Thames Water lenders demand reprieve on fines in £17bn rescue deal | Ofwat urged to consider 'regulatory reset' after struggling utility giant hit with record penalty Nervous families freeze spending in blow to growth hopes | Fresh pressure on Rachel Reeves as retail sales rise just 1pc Miliband warned carbon capture project faces collapse without £4bn injection | Fledgling green tech has already received almost £22bn in public subsidies SNP ferry scheme suffers fresh blow after rain causes ship to flood | Glen Rosa is already behind schedule and £100m over budget What happened overnight Asian shares were mixed on Tuesday as investors kept an eye on the China-US trade talks that might help stave off a recession. A second day of talks was planned after US and Chinese officials met in London for negotiations over various issues. The hope is that they can eventually reach a deal to reduce painfully high tariffs against each other. Most of the tariff hikes imposed since Donald Trump escalated his trade war are paused to allow trade in everything from tiny tech gadgets to enormous machinery to continue. In Asian trading, Tokyo's Nikkei 225 gained 0.2pc to 38,177.71, while the Kospi in South Korea jumped 0.3pc to 2,865.24. Hong Kong's Hang Seng fell 0.2pc to 24,127.30 and the Shanghai Composite index was down 0.5pc to 3,384.47. In Taiwan, the Taiex surged 2.1pc to 22,242.14. Australia's S&P/ASX 200 advanced 0.8pc to 8,587.20. On Wall Street, the Dow Jones Industrial Average was flat, at 42,761.76, the S&P 500 rose 0.1pc, to 6,005.88. and the Nasdaq rose 0.3pc, to 19,591.24. In the bond market, the yield on benchmark 10-year US Treasury notes fell to 4.478pc from 4.494pc late on Sunday.

US-China trade talks to resume; UK jobs market ‘weakening' as payrolls tumble
US-China trade talks to resume; UK jobs market ‘weakening' as payrolls tumble

The Guardian

time43 minutes ago

  • The Guardian

US-China trade talks to resume; UK jobs market ‘weakening' as payrolls tumble

Update: Date: Title: Introduction: US-China trade talks resume in London Content: Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. Trade talks between the US and China are set to resume in London today, as officials push for a breakthrough over shipments of technology and rare earth elements. After more than six hours of talks on Monday, negotations will resume at Lancaster House later this morning. Investors are hopeful of a breakthrough that could continue to ease tensions between the two economic superpowers. President Donald Trump has indicated that the first day of talks were encouraging. He told reporters that 'We are doing well with China. China's not easy….I'm only getting good reports.' The US are unhappy that China has not released crucial rare earth minerals, and magnets, as rapidly as hoped since the two countries agreed an initial trade pact in Geneva a month ago. Treasury secretary Scott Bessent told reporters in London they had a 'good meeting', Bloomberg reports, while commerce secretary Howard Lutnick called the discussions 'fruitful.' 7am BST: UK labour market report 10.15am BST: FCA CEO Nikhil Rathi and FCA chair Ashley Adler testify to Treasury Committee 2.30pm BST: World Bank to release latest economic forecasts Update: Date: 2025-06-10T06:23:19.000Z Title: UK payrolls fall 'notably' in May Content: Newsflash: The number of people on payrolls across the UK has fallen notably, in a sign that the jobs market is weakening. The latest labour force statistics, just released, show that payrolled employment decreased by 109,000 employees (0.4%) in May, compared with April. On an annual basis, there were 274,000 fewer employees last month, compared with May 2024, pulling total payrolls down to 30.2 million. The Office for National Statistics does caution that these estimates are more uncertain than usual; if they're accurate, though, it indicates that demand for workers at British firms is cooling. The revised estimate of employees on the payroll in April 2025 was down 55,000 on the month. The provisional estimate for May 2025 was down another 109, more about this release ➡ The largest decrease was in the accommodation and food service activities sector, a fall of 124,000 employees in the last year, while health and social work added 62,000 employees. ONS director of economic statistics Liz McKeown says: 'There continues to be weakening in the labour market, with the number of people on payroll falling notably. Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on. Update: Date: 2025-06-10T06:22:54.000Z Title: Introduction: US-China trade talks resume in London Content: Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. Trade talks between the US and China are set to resume in London today, as officials push for a breakthrough over shipments of technology and rare earth elements. After more than six hours of talks on Monday, negotations will resume at Lancaster House later this morning. Investors are hopeful of a breakthrough that could continue to ease tensions between the two economic superpowers. President Donald Trump has indicated that the first day of talks were encouraging. He told reporters that 'We are doing well with China. China's not easy….I'm only getting good reports.' The US are unhappy that China has not released crucial rare earth minerals, and magnets, as rapidly as hoped since the two countries agreed an initial trade pact in Geneva a month ago. Treasury secretary Scott Bessent told reporters in London they had a 'good meeting', Bloomberg reports, while commerce secretary Howard Lutnick called the discussions 'fruitful.' 7am BST: UK labour market report 10.15am BST: FCA CEO Nikhil Rathi and FCA chair Ashley Adler testify to Treasury Committee 2.30pm BST: World Bank to release latest economic forecasts

Rupee treads water with Asian peers, volatility curve shifts lower
Rupee treads water with Asian peers, volatility curve shifts lower

Reuters

time2 hours ago

  • Reuters

Rupee treads water with Asian peers, volatility curve shifts lower

MUMBAI, June 10 (Reuters) - The Indian rupee was marginally higher in early trading on Monday, sidestepping modest declines in most regional currencies on the back of dollar-selling interest from foreign and state-run banks, traders said. On the day, the rupee was last quoted at 85.55, up marginally from its close of 85.62 in the previous session. Asian currencies were mostly rangebound as well, with traders awaiting the outcome of the ongoing U.S.-China trade talks in London. U.S. President Donald Trump on Monday put a positive spin on the talks, saying they were going well and he was "only getting good reports" from his team of officials. Trade talks between Indian and U.S. officials are also ongoing, with both sides seeking consensus on tariff cuts in the farming and auto sectors. The two countries aim to finalise an interim deal before the July 9 deadline. For the local economy, the Reserve Bank of India is "likely to play a key role in delivering policy support, with fiscal policy more focused on capex execution," BofA Global research said in a note. The rupee's range-bound price action over the last one month, meanwhile, has cooled its volatility expectations across tenors. The 1-month implied volatility eased to about 4.7%, and the 1-year gauge dipped to about 4.6%. The gauges had spiked sharply in early May as a conflict between India and Pakistan flared up, but have since cooled as the rupee settled into an 85-86 range over the past month. "As markets await the outcome of the U.S.-China trade talks, the rupee has gone into a shell within the broad range of 85-86, with daily inflows and outflows deciding the movement on either side," said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store