Latest news with #deGuindos
CNBC
21-05-2025
- Business
- CNBC
A ‘fundamental regime shift' could be underway as investors rethink U.S. assets, ECB says
The European Central Bank on Wednesday said a "fundamental regime change" could be underway in financial markets as investors appear to be reassessing how risky U.S. assets really are in the wake of trade tariffs. In its latest Financial Stability Review, the central bank discussed the recent spike in market volatility off the back of global trade tensions driven by U.S. tariff policy. Markets have been reacting sensitively to the frequent updates around trade and levies from the U.S. and its trading partners. Stocks first tumbled when U.S. President Donald Trump announced sweeping tariffs, before rebounding when he declared a temporary 90-day pause on duties. "During the turmoil, market functioning – which can be thought of as the ability to trade financial assets quickly without moving prices inordinately – in euro area financial markets held up well," the ECB noted. "This was despite some atypical shifts away from some traditional safe havens like US Treasuries and the US dollar." While this could have been linked to technical factors, the ECB said, it might have also had broader triggers. "These moves might also have reflected perceptions of a more fundamental regime change, with investors seeming to reassess the riskiness of US assets, possibly leading to broader shifts in global capital flows," the ECB noted. "This would have potentially far-reaching consequences for the global financial system." ECB Vice President Luis de Guindos on Wednesday suggested to CNBC that there was a risk of a market correction down the line. Two key things to currently consider are elevated valuations and strong uncertainty, he told CNBC's Annette Weisbach. "Markets are very benign with respect to this scenario. They believe that, you know, growth is going to be low, but we are not going to enter into a recession, inflation is going to decline, and monetary policy will follow suit," de Guindos explained. Risks could still emerge, and various issues such as what could happen regarding trade and fiscal policies and regulation from the U.S. government are unclear, he said. "And these elements give rise to volatility. I think that volatility is, perhaps, you know, the consequence of these two elements ..., valuations and uncertainty." In its report, the central bank pointed out that it had previously warned about "vulnerabilities posed by high valuations that are not backed by fundamentals," saying that "this source of risk has now partly materialised." Trump's reciprocal tariff announcement was the trigger for this, the ECB said. Taking a broader view, de Guindos said uncertainty linked to U.S. trade, fiscal and regulatory policy was now the "name of the game" throughout financial markets and the global economy. The question was now what this uncertainty and any eventual policy moves meant for Europe and financial stability in the euro area, he suggested. Looking at inflation and economic growth, de Guindos reiterated that tariffs would be "detrimental" to growth, while the impact on prices was less clear. In the short term, tariffs would raise the prices of imported goods, while at the same time depressing demand, which could offset the higher costs, he said. Long-term implications could look very different. "[In the] long term, if tariffs and trade distortions give rise to fragmentation that will be detrimental to the supply chain, and that could increase the cost of the corporates. And that could be inflationary," de Guindos said. Earlier this week, the European Union put out its latest economic projections, cutting its 2025 gross domestic product forecast for both the EU and euro area to 1.1% and 0.9% respectively. This compares to a previous estimate of 1.5% growth for the EU and a 1.3% expansion for the euro area. Headline inflation is meanwhile expected to slow, falling below the ECB's 2% target in 2026.
Yahoo
15-05-2025
- Business
- Yahoo
Trade war, high debt, market volatility among top risks for euro zone, ECB says
FRANKFURT (Reuters) -A global trade war, financial market volatility and high debt levels are the three key risks facing the euro zone economy, ECB Vice President Luis de Guindos said on Thursday, previewing the bank's upcoming report on financial stability. The euro zone economy appears to be holding up well despite a raft of U.S. tariffs that set off financial market volatility last month but the bloc is still facing trade barriers that could hamper growth given its large reliance on trade. The European Central Bank's biannual Financial Stability Review, due on May 21, will also focus on how the global upheaval since U.S. President Donald Trump took office could hurt the 20-nation euro zone, de Guindos said. "The risks to growth resulting from trade tensions, combined with higher defence spending, may limit the fiscal space available to shield the economy from adverse shocks, address structural challenges associated with climate change, digitalisation and low productivity," he said in a speech. While equity markets sold off after the tariffs were announced in early April, they have mostly rebounded and valuations may be out of sync with potential risks. "Like with equity market risk premia, credit spreads remain compressed and appear to be out of sync with the very high levels of geopolitical and policy uncertainty," de Guindos said. "There is a risk that investors may be underestimating and underpricing the likelihood and impact of adverse scenarios." Trade tensions will feed through to growth via lower confidence and even if there is a political resolution, firms and households are likely to curb spending as a precaution, de Guindos added. Governments are likely to boost spending both to prop up growth and meet increased defence commitments, but debt levels are already high and debt service costs could strain public finances, even before states address other structural issues. Sign in to access your portfolio
Reuters
28-03-2025
- Business
- Reuters
ECB's de Guindos sees 'good news' on inflation amid trade fears
FRANKFURT, March 28 (Reuters) - The economic outlook for the euro zone is complicated by fears about a trade war with the United States but at least inflation is heading down towards the European Central Bank's 2% target, the ECB's vice-president, Luis de Guindos, said on Friday. "We have good news on inflation," de Guindos told a Spanish event via video-link. "If there are doubts on economic growth, the disinflation process is continuing. We are convinced that in the next few quarters we'll achieve our definition of price stability, which is 2%, on a sustainable basis."
Yahoo
10-02-2025
- Business
- Yahoo
Trump's tariffs spur economic uncertainty, impact on inflation less clear, ECB's de Guindos says
MADRID (Reuters) - Trade tariffs announced by U.S. President Donald Trump could trigger economic uncertainty but the impact on inflation is less clear, European Central Bank Vice President Luis de Guindos said on Monday. Trump's plan for 25% tariffs on all steel and aluminium imports into the United States, on top of existing metals duties, represents another major trade escalation. "Today we woke up to the issue of steel and aluminium," de Guindos told Spanish broadcaster TVE. "Apart from the geopolitical risks, I think that the policy of the new American administration obviously creates a situation of huge uncertainty." See for yourself — The Yodel is the go-to source for daily news, entertainment and feel-good stories. By signing up, you agree to our Terms and Privacy Policy. The ECB's number two official said that the implementation of tariffs would create a "supply shock" therefore "fundamentally" affecting global economic growth. "The impact on inflation is much less clear (...) because if you have a fall in economic activity then immediately that tempers the evolution of the inflationary tensions," de Guindos said. De Guindos said it was important to avoid a trade war, adding that Europeans needed to be careful in their response to potential U.S. trade tariffs. "Sometimes the initial announcements don't end up materialising (..) therefore, you have to take a prudent and intelligent approach," he said. De Guindos said that inflation in the euro zone was converging towards the ECB's medium goal of 2% and that decisions on the bank's future monetary policy would be taken meeting by meeting.
Reuters
10-02-2025
- Business
- Reuters
Trump's tariffs spur economic uncertainty, impact on inflation less clear, ECB's de Guindos says
MADRID, Feb 10 (Reuters) - Trade tariffs announced by U.S. President Donald Trump could trigger economic uncertainty but the impact on inflation is less clear, European Central Bank Vice President Luis de Guindos said on Monday. Trump's plan for 25% tariffs on all steel and aluminium imports into the United States, on top of existing metals duties, represents another major trade escalation. "Today we woke up to the issue of steel and aluminium," de Guindos told Spanish broadcaster TVE. "Apart from the geopolitical risks, I think that the policy of the new American administration obviously creates a situation of huge uncertainty." The ECB's number two official said that the implementation of tariffs would create a "supply shock" therefore "fundamentally" affecting global economic growth. "The impact on inflation is much less clear (...) because if you have a fall in economic activity then immediately that tempers the evolution of the inflationary tensions," de Guindos said. De Guindos said it was important to avoid a trade war, adding that Europeans needed to be careful in their response to potential U.S. trade tariffs. "Sometimes the initial announcements don't end up materialising (..) therefore, you have to take a prudent and intelligent approach," he said. De Guindos said that inflation in the euro zone was converging towards the ECB's medium goal of 2% and that decisions on the bank's future monetary policy would be taken meeting by meeting.
