Trump Seizes Opportunity for Resignation on Federal Board
The US Federal Reserve and the European Central Bank (ECB) have maintained their respective interest rates at their current levels, as trade disputes between the US and the eurozone continue to impact the global economy.
In December 2024, the US Federal Reserve decided to keep the interest rate unchanged, a decision that has not been revised since. The ongoing trade dispute, characterized by elevated tariffs, has led to slower US economic growth and increased inflationary pressures. The US economy is experiencing subdued GDP growth of about 1% in 2025 amid a rise in average tariff rates, expected to reach nearly 20% in 2026.
The tariff-induced inflation is projected to raise core inflation by about one percentage point to over 3%, putting pressure on consumer spending. This complex situation complicates the Fed's interest rate decisions. On one hand, increased inflation typically pushes the Fed toward higher interest rates to contain price pressures. On the other hand, slower growth raises recession risks, which could argue for lower rates or a cautious policy stance.
Trade uncertainty and negotiations, with some easing seen in deals with Japan, Korea, India, and China, add volatility to markets and significantly impact Fed policy considerations.
Meanwhile, the ECB faces indirect effects stemming from global trade dynamics. The ongoing high tariff environment amid fragile trade agreements and global policy uncertainty sustain cautious monetary easing by the ECB. The ECB's interest rate decision is influenced by the trade dispute with the US, as it impacts the eurozone economy. The US dollar has depreciated by roughly 8% since early 2025, while the euro has appreciated significantly relative to the dollar, which can affect European export competitiveness and inflation trends.
Inflation in the eurozone has eased, generally receding, and financial conditions remain accommodative. However, the trade dispute with the US is weighing on the eurozone economy, causing uncertainty. The ECB has not altered its interest rate since the information given in the previous bullet points.
In summary, US trade disputes and tariff policies are contributing to a complex global interest rate environment. The Fed must balance inflationary pressures against slowing growth and recession risks, leading to cautious or mixed interest rate policy signals. The ECB navigates the consequences of currency fluctuations and subdued inflation amid fragile trade conditions, maintaining relatively accommodative monetary policy. The trade dispute between the US and the eurozone continues to weigh heavily on both economies.
The US Federal Reserve's interest rate decision in December 2024 was influenced by the ongoing trade dispute with the eurozone, as the tariff-induced inflation and resulting increased inflationary pressures have complicated the Fed's policy considerations. Moreover, the trade dispute has led to slower US economic growth and a rise in average tariff rates, impacting the business and finance sectors significantly.
The ECB's interest rate decision, meanwhile, is also influenced by the trade dispute with the US, as it impacts the eurozone economy and sustains cautious monetary easing by the bank. This situation, characterized by currency fluctuations and subdued inflation amid fragile trade conditions, is reflected in the general-news headlines.
