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Investing.com -- According to Jose Luis Escriva, European Central Bank policy maker and Spain's central bank governor, the U.S. tariffs will negatively affect the Spanish and other euro zone economies. However, the influence on inflation remains uncertain, he said today.
The announcement of U.S. tariffs has caused a disruption in global financial markets, strengthening the case for another rate cut by the European Central Bank (ECB) next week. Economists suggest this situation also supports the argument for quicker policy easing from the ECB, the world's second largest central bank.
According to Reuters, Escriva stated that it's too soon to discuss a recession, but acknowledged that U.S. policies have resulted in a severe disruption of supply. This situation could potentially lead to sharp drops in economic activity or a slowdown in economies like Spain's.
Despite these potential outcomes, Escriva ruled out a recession. When asked about inflation, Escriva explained that U.S. levies could potentially have both negative and positive effects on prices in the euro zone. These effects could include a decrease in demand, consumption, and investments, or short-term disruptions on supply chains.
Escriva highlighted the need to evaluate the balance of these two elements to determine the net result. He added that if the effects on confidence are persistent, decisions would have to be made accordingly. The direction of these effects, however, remains unclear.
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