Investing.com - The European Central Bank should consider leaving interest rates unchanged at its next policy meeting in April, rate-setter Pierre Wunsch said on Thursday.
Speaking to CNBC, Wunsch, head of the National Bank of Belgium and a member of the ECB’s Governing Council, flagged that a murky outlook around U.S. President Donald Trump’s tariff policies could refuel inflationary pressures and weigh on growth.
He added that, against this backdrop, the possibility of a pause in the ECB’s recent cycle of rate reductions was "on the table."
Wunsch noted that he was "not pleading" for the ECB to hold its key deposit rate at its current level of 2.5%. Earlier this month, officials at the central bank slashed borrowing costs for the sixth time since June, although it warned that it faces "phenomenal uncertainty" partly from rising trade war risks.
On Wednesday, Trump unveiled a fresh 25% tariff on automotive imports into the U.S., following through on a pledge to penalize foreign manufacturers of cars and light trucks. Europe’s auto industry, which includes names like Volkswagen (ETR:VOWG_p) and BMW (ETR:BMWG), are tipped to be hit hard by the actions.
Meanwhile, European leaders have begun to discuss the possibility of increasing military spending in response to growing fears that the U.S. may no longer be willing to provide a reliable security backstop for the continent.
Germany, Europe’s traditional economic powerhouse, has been a major figurehead of this trend, with the country’s parliament recently approving sweeping changes to longstanding limits on borrowing. The decision, which was backed by Germany’s likely next Chancellor Friedrich Merz, paves the way for a massive uptick in expenditures on both defense and infrastructure.
Analysts have flagged that such plans could push up prices, bolstering the case for the ECB to keep rates steady at its next policy meeting on April 17.
In a recent interview, Austrian central bank governor Robert Holzmann said he was "in favor of a possible interest rate pause" next month, arguing that the ECB could still resume lowering borrowing costs in the summer.