G-7 Central Banks Prepare First Responses to US Tariff Chaos
The first Group of Seven monetary policy decisions since President Donald Trump’s trade war unleashed global market turmoil may prompt diverging responses from either side of the Atlantic.
While Bank of Canada officials on Wednesday could keep borrowing costs on hold to guard against the potential inflationary impact of an ongoing tariff battle with the US, the European Central Bank is now widely anticipated to reduce interest rates the following day.
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The next Federal Reserve decision isn’t until May 7, so this week’s meetings put the onus on policymakers in Frankfurt and Ottawa to soothe investors while assessing the economic fallout from Trump’s action.
The US president has paused many of the harshest elements of his promised tariffs — with actions against China the exception — but market volatility and pervasive uncertainty may inflict damage too. ECB President Christine Lagarde hinted at those risks on Friday, saying officials are monitoring the situation and have tools available, and that price stability and financial stability go hand-in-hand.
This is the second time in just over two years that she and colleagues find themselves puzzling over a rate decision in the wake of turmoil emanating from the US, but before Fed policymakers met. After the collapse of Silicon Valley Bank prompted market ructions in 2023, the ECB opted not to blink, and delivered a promised half-point hike.
On this occasion, the ECB’s decision may be more straightforward. With tariffs likely to hit the economy but the European Union holding off for now on inflationary countermeasures, officials are widely expected to cut their rate by a quarter point.
Canada has more of a trade-off to consider. While Trump’s tariffs are already hurting business investment and consumer spending, inflation expectations are spiking. Data on consumer prices out on Tuesday may prove pivotal for their judgment.
What Bloomberg Economics Says:
“The ECB’s next interest rate decision on April 17 is becoming an easier one to make. On top of the potential direct hit to the euro-area economy from US tariffs, the Governing Council will also have to take into consideration the impact of a stronger currency.”
—David Powell and Simona della Chiaie, economists. For full analysis, click here
Elsewhere, rate decisions from South Korea to Turkey, Chinese GDP data, and inflation reports from the UK to Japan are among the highlights.
Click here for what happened in the past week, and below is our wrap of what’s coming up in the global economy.
Against a backdrop of rising Treasury yields, weaker dollar and slumping stocks tied to US trade policy, investors will be seeking clues from Fed policymakers on their appetite for lower interest rates.
Fed Chair Jerome Powell will offer his assessment of the economy in a speech on Wednesday before the Economic Club of Chicago. The same day, regional Fed presidents Jeff Schmid and Lorie Logan will discuss the economy and banking.
On Monday, Fed Governor Christopher Waller speaks on the economic outlook, and Fed Governor Lisa Cook will offer remarks Tuesday.
Meanwhile, March retail sales on Wednesday are projected to show a solid increase as consumers raced to beat tariffs on imported motor vehicles and auto parts. The median projection in a Bloomberg survey of economists calls for a 1.4% jump in sales, the largest monthly increase since the start of 2023.
Industry data show vehicle sales increased to an annualized 17.77 million pace, the strongest month for car dealers in nearly four years, according to Ward’s Intelligence. Trump raised duties on imported autos and parts to 25%, which went into effect on April 3.
Excluding vehicles, gasoline, building materials and food services — the so-called control-group sales, which closely track goods spending within the gross domestic product report — sales are seen posting a solid gain to cap an otherwise tepid quarter for the consumer.
Also on Wednesday, industrial production data will probably show a 0.2% decline in March as moderate temperatures limited utility output and manufacturing cooled. Government figures on Thursday are forecast to show a decline in housing starts as builders concentrated on reducing new-home inventory.
Data from China, which is currently bearing the brunt of Trump’s global tariff onslaught, may point to waning momentum before the US president’s levies were unveiled.
Export numbers on Monday are seen likely to show slowing in March, while first-quarter GDP numbers two days later are anticipated to reveal evidence of an economy losing steam. In a report on Thursday, consumer deflation persisted for a second month.
Despite the pressure bearing down on it, Beijing hasn’t flinched. On Friday, China retaliated against Trump’s latest tariffs by hiking duties on all US goods, calling the administration’s actions a “joke,” and saying it no longer considers them worth matching.
A rate decision is expected on Monday from the Monetary Authority of Singapore, with Bloomberg Economics anticipating easing. On Thursday, South Korea’s central bank is predicted to keep its borrowing costs unchanged.
Countries releasing inflation numbers in the coming week include India on Tuesday, New Zealand on Thursday, and Japan on Friday.
Europe, Middle East, Africa
UK reports are likely to draw investor attention, with data pointing to the strength of price pressures in the economy.
On Tuesday, the labor-market report may reveal still-buoyant wage growth. The following day, inflation numbers are likely to show weakening on both headline and underlying measures, though still with outcomes that remain well above the 2% level targeted by the Bank of England.
Neither report may offer policymakers enough comfort to accelerate monetary easing despite the global backdrop of trade tensions, not least after Friday’s report showing an unexpected surge in growth during February.
In the euro zone, second-tier economic reports may help guide ECB policymakers toward their decision on Thursday. February industrial production will be released on Tuesday, as will the German ZEW survey of investor sentiment.
The same day, Israel’s annual inflation may show deceleration to 3.2% in March. That would still be above the country’s target range of 1% to 3%, and may cause the central bank to wait for a further slowdown before beginning a cycle of rate cuts to help the war-strained economy.
Several rate decisions are planned around the region:
In his first year in office, President Javier Milei delivered a fiscal surplus, Argentina’s first in over a decade and roughly equivalent to 1.8% of GDP — and 0.3% after accounting for interest payments. March data posted Wednesday will likely show the government notching its 14th monthly surplus since 2023.
In a landmark moment, Argentina on Friday reached a $20 billion agreement with the International Monetary Fund after Milei made sweeping changes to ease the nation’s currency controls.
Peru on Tuesday publishes February GDP-proxy data along with the March labor market report for its megacity capital, Lima.
The nation’s economy has expanded faster than expected for seven straight months, and Finance Minister Jose Salardi says Peru can grow as much as 4% this year and 5% the next.
Analysts surveyed by Bloomberg expect growth of 3% this year, up from 2.8% forecast in December, on the back of higher metal prices. Peru is the world’s No. 3 copper producer and a major exporter of gold.
After losing some momentum toward the end of 2024, Colombia’s economy picked up steam in January on the back of lower interest rates and higher real wages. A raft of indicators in the coming week will likely support the consensus view that 2025 GDP will tick higher for a third year.
With assistance from Andrew Atkinson, Vince Golle, Robert Jameson, Joel Rinneby, Piotr Skolimowski and Monique Vanek.
This article was generated from an automated news agency feed without modifications to text.
