ECB Rates and US tariffs: being half pregnant

Summary
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• ‍Following the benign first quarter Eurozone inflation readings, I change my call for the April Governing Council meeting to a 25bps cut instead of a hold. I still have another 25bps cut pencilled in for the June meeting;‍
• President Trump’s ‘Liberation Day’ tariffs increase the odds of an April cut – or they may not. For sure, the tariffs are a negative for Eurozone growth and inflation through the stronger euro exchange rate. But the ECB might also want to avoid getting caught up in the trade war crossfire and hold rates for one meeting;‍
• In today’s ECB piece I will discuss Trump tariffs first, concluding that they are a hopeless attempt at raising fiscal revenue while eliminating the trade deficit. You cannot have it both ways, President Trump.