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The level of uncertainty we are facing is exceptionally high, said European Central Bank president Christine Lagarde at a speech on Wednesday. Established certainties about the international order have been upended. Some alliances have become strained while others have drawn closer. We have seen political decisions that would have been unthinkable only a few months ago. This new environment raises fundamental questions for monetary policy, she added. She further said that trade fragmentation and higher defence spending in a capacity-constrained sector could in principle push up inflation. Yet US tariffs could also lower demand for EU exports and redirect excess capacity from China into Europe, which could push inflation down. In her concluding remarks, Lagarde stated that maintaining stability in a new era will be a formidable task and it will require an absolute commitment to our inflation target, the ability to parse which types of shocks will require a monetary reaction and the agility to react appropriately. Our response to the recent inflation episode should give the public confidence that we will always do whatever is necessary to deliver price stability ' and that our policy frameworks can adapt to new circumstances, she added. Last week, ECB trimmed interest rates for the sixth time in nine months, sticking to its easing plan in the face of economic upheaval from an unfolding trade war and new plans to boost Europe's military spending. With inflation closing in on its 2% target, the central bank for the euro zone lowered the rate it pays on bank deposits by 25 basis points to 2.5% a level it saw as meaningfully less restrictive. Today, EURUSD is trading with a mild pull back amid recovery in dollar from a five month low. The pair however stays near its four month high and is currently quoting at $1.0910. Powered by Capital Market - Live News
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