ECB’s Escrivá: Inflation Impact of Trade Tensions Hard to Determine, Forces in Opposite Directions

13 May 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member José Luis Escrivá said on Tuesday that the impact of trade tensions on inflation was hard to determine and that there were forces working in opposition to each other.

In a speech at the 4th Biennal Conference on Global Risk, Uncertainty, and Volatility in Zurich, Escrivá, who heads the Banco de España, said that ‘while the impact [of US trade policies] on GDP … is far more clear-cut, on inflation it is far more difficult to grasp in advance, and there are potential dynamics moving in opposite directions.’

Escrivá called for a change in the ECB’s way of communicating its scenarios and balance of risks.

‘We have to weigh more on the risk analysis to the central scenario’, he said. ‘We need to be able to … anticipate that we are prepared to respond to different alternative scenarios’.

‘All’ central banks were now working on scenarios with regards to the US tariff announcement, according to Escrivá, who highlighted the importance of high frequency data in moments of uncertainty.

The ECB should rely on this type of data in turning point moments where hard data is immediately considered old, he said.

‘High uncertainty might become the new normal’, he said. ‘We may believe that this high uncertainty may stay with us for some time and dealing with it is something that may become structural.’