ECB’s Villeroy: US Tariff Hikes Could Impact European Long-Term Interest Rates

26 November 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Tuesday that although the impact of US tariffs on European inflation might be insubstantial, that on long-term interest rates could be more considerable.

Speaking at a conference organised by the Prudential Control and Resolution Authority in Paris, Villeroy, who heads the Banque de France, said, ‘The inflation effect could be relatively limited in Europe, however long-term interest rates set by the market have a certain tendency to cross the Atlantic.'

While reiterating that, in his view, trade tensions with the US would not change the situation for short-term rates in Europe, long-term rates ‘could see a transition effect’, he said.

Risks for the global economy could mount if US President-elect Donald Trump’s potential tariff hikes and tax cuts materialised, increasing inflation in the US and weakening growth in the rest of the world, he said.