The ECB Must Act Ahead of a Possible Trump Return
Europe’s energy and security ambitions won’t be helped by delaying rate cuts. The central bank has to think more geopolitically.
Think about it.
Source: NELSON ALMEIDA/AFP
On Feb. 23, Austrian central banker Robert Holzmann issued a warning that it was “too early” to talk about interest-rate cuts in the euro zone. Explaining why, he turned his gaze to the Red Sea. “The main risk is the geopolitical risk … We don’t have a peace plan, we don’t have a solution,” he said, laying out the threat of rocketing oil prices that might mean keeping interest rates high to curb inflation.
Central bankers are a famously risk-averse tribe, and it’s part of their job description to think of nasty scenarios in a more conflict-ridden world — especially when the damage above water from Houthi strikes appears to be spreading to critical infrastructure below like telecom cables. Holzmann isn’t alone in preferring to err on the side of caution, judging by the widespread expectation that the European Central Bank — where he serves as governing council member — will hold rates at 4% on Thursday.