Holstein, DZ Bank's Economist Chats About Future Inflation, Tariffs, and Trade Conflicts
Chatting Economics with Börsen-Zeitung
"ECB stands pat on interest rates, no more decreases needed"
Michael Holstein, the brainy Chief Economist of DZ Bank, recently spilled some insightful thoughts to Börsen-Zeitung. Here's what he had to say about inflation, the ECB's interest rate cut, the EU-US tariff tiffs, and much more.
Potential Last Hurrah for Rate Cuts
Holstein predicts that Thursday's ECB rate cut might be the final one for this year. Yet, there's a chance we might see another cut in autumn, making monetary policy too cozy, according to Holstein. But in the short-term, he doesn't see the necessity for additional rate cuts.
Inflation Over 2% by 2026
Unlike a few ECB council members, Holstein doesn't foresee a looming risk of low inflation for the eurozone due to the trade war. He expects inflation to surpass 2% in 2026 and the years following it, crediting it to structural factors, like demographic change and increased fiscal spending. He also counters the central bank's view on the trade war as deflationary.
Europe: Trump's Principal Rival
In the heated tariff negotiations between the U.S. and EU, Holstein foresees a tough road for Brussels. He suspects that Trump considers the EU his main battle, rather than China. A mutual free-trade zone with zero tariffs, as proposed by Brussels, appears unachievable, in his opinion.
Tariffs at the Forefront for Trump
Holstein believes tariffs hold significant importance for Trump and could escalate by his term's end. However, Trump seems to be gaining a more realistic perspective on tariffs, thanks to the financial markets and U.S. companies' responses, according to Holstein.
Slowing Growth During Q2
Following the surprising growth of Germany and the Eurozone in Q1 attributed to timing effects, Holstein predicts a deceleration in growth during Q2. He even forecasts a potential contraction of the German economy from April to June. Nevertheless, Holstein expects a gradual recovery thereafter.
*Full Interview*
Interview Page 6
ECB's Perspective:
The European Central Bank (ECB) aims to keep inflation steady at 2% over the long haul[2]. Current inflation rates and economic uncertainties may influence ECB policy decisions[2]. Without specific information from Holstein, it's tricky to provide a detailed account of his expectations for inflation. However, general economic forecasts, such as those by the Bundesbank, indicate a decline in inflation rates in the coming years[1].
Finance and business are closely intertwined in Holstein's perspective on the European Central Bank's (ECB) rate cuts. He predicts that the ECB's rate cut in the near future might be the final one for this year, yet there's a possibility of another cut in autumn, leading to monetary policy being too accommodative according to Holstein. In terms of business, Holstein expects inflation to surpass 2% in 2026 and the years following it, crediting it to structural factors like demographic change and increased fiscal spending.
