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ECB's de Guindos: Trade jitters hamper policy normalization

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ECB's de Guindos: Trade jitters hamper policy normalization

The European Central Bank is facing a "much more challenging" path to monetary policy normalization compared to a year ago amid increased external risks including global trade tensions, ECB Vice President Luis de Guindos told Bloomberg News.

The ECB has kept key rates unchanged at record low levels and pushed the timing of a possible rate hike from summer to the end of 2019, as it slashed its 2019 growth outlook for the eurozone.

"There are a lot of downside risks, but this time the risks are related mainly to situations outside the borders of the euro area," de Guindos said in an interview with Bloomberg News. De Guindos said the real risk of a full-blown trade war "would be detrimental" to the global economy and eurozone economy.

In its latest financial stability review, the ECB flagged risks stemming from weaker-than-expected global growth and a potential escalation of trade tensions.

In April, the EU and U.S. threatened each other with tariffs on a wide range of products due to a longstanding dispute over aircraft subsidies. Both sides are yet to launch negotiations on eliminating tariffs on industrial goods, despite having agreed to do so in April, with Brussels not ready to include agriculture in the negotiations.