situation report

Jun 18, 2019 | 20:23 GMT

2 mins read

EU, U.S.: European Central Bank President Opens the Door for More Stimulus, Irritating Trump

What Happened: European Central Bank (ECB) President Mario Draghi said on June 18 that "additional stimulus will be required" unless growth in the eurozone economy improves, The New York Times reported. Draghi's remarks prompted U.S. President Donald Trump to take to Twitter to accuse the ECB of manipulating currency rates.

Why It Matters: The European economy is struggling and the ECB could act as early as July. It's no surprise for Trump to be annoyed about a potential new round of European stimulus given that he has long focused on what the euro and China's currency are doing relative to the dollar. Trump might try to bring the issue into trade talks with the European Union over autos. Trade frictions between the United States and the European Union over potential auto tariffs could delay any recovery in the European economy, particularly for Germany.

Background: Draghi's remarks came as the U.S. Federal Reserve's policymaking committee began a two-day meeting in Washington. While the Fed is expected to leave interest rates unchanged, many economists think policymakers will signal that they are willing to cut rates soon if a slowing global economy and escalating trade tensions threaten U.S. growth.

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