Bank

Donald Trump

Reserve

Europe’s central banks are scrambling as Donald Trump prepares to step back into the White House. His incoming presidency has reignited fears of trade wars, geopolitical tensions, and currency volatility. 
Policymakers across the continent are in damage-control mode, slashing interest rates and signaling further cuts to shield their fragile economies. 
The Swiss National Bank (SNB) shocked markets with a half-point cut, bringing rates to 0.5%. This level hasn’t been seen since September 2022, back when Switzerland ended its eight-year experiment with negative rates. 
Meanwhile, the European Central Bank (ECB) followed up with its own quarter-point reduction, dropping its key rate to a 1.5-year low. Christine Lagarde, ECB President, laid out the game plan: “The direction of travel currently is very clear.” The cuts are expected to continue into 2025, with insiders hinting at similar actions in January and March. 
<h3 id="span-style-font-weight-400-currency-chaos-and-swiss-fears-span">Currency chaos and Swiss fears</h3> 
The Swiss franc, often seen as a safe haven during global crises, has become a source of anxiety for the SNB. Antoine Martin, the bank’s vice president, bluntly stated that external risks pose the biggest threat to Switzerland’s economy. 
The SNB is prepared to do whatever it takes to stabilize the franc, including more rate cuts, intervening in currency markets, or even bringing back negative rates. 
Martin Schlegel, SNB President, warned traders not to test the central bank’s resolve. “Developments abroad represent the main risk,” he said, pointing to Trump’s return as a potential trigger for currency speculation.&nbsp; 
Switzerland relies on open and stable global markets, and any disruption from Trump’s trade policies could hit its economy hard. 
<h3 id="span-style-font-weight-400-ecb-braces-for-economic-fallout-span">ECB braces for economic fallout</h3> 
The ECB, already facing weak economic growth and sluggish inflation, is now staring down an even bigger problem: Trump’s trade policies. The central bank cut its deposit rate by 25 basis points, bringing it down to 3%. That was the third consecutive rate cut, totaling 100 basis points since June. 
Lagarde made it clear that the ECB is moving away from restrictive monetary policies. The bank’s latest projections paint a bleak picture. Eurozone growth for 2025 is now expected to hit just 1.1%, down from an earlier forecast of 1.3%. 
Inflation is stuck at 2.3%, with the risk of falling further below the bank’s 2% target. Economists at ABN Amro <a href="https://www.bloomberg.com/news/articles/2024-12-12/ecb-interest-rates-third-straight-cut-will-help-support-eurozone-economy#:~:text=The%20European%20Central%20Bank%20lowered,analyst%20in%20a%20Bloomberg%20survey%20." rel="nofollow noopener" target="_blank">described</a> Trump’s tariffs as a “disinflationary shock,” predicting even looser monetary policies to offset the fallout. 
Investors are betting that ECB rates could drop to as low as 1.75% by late 2025. But some think even that might not be enough. 
<h3 id="span-style-font-weight-400-global-domino-effect-span">Global domino effect</h3> 
Europe isn’t alone in trying to Trump-proof its economy. Canada’s central bank preemptively cut rates by 50 basis points this week, citing fears of higher tariffs from its southern neighbor. 
Brazil, facing its own fiscal turmoil and Trump’s warnings to BRICS countries not to challenge the U.S. dollar, took a different approach, raising rates by 100 basis points to steady its currency. 
The ECB, however, has unique challenges. While growth in the eurozone unexpectedly ticked up in the third quarter, recent data shows cracks forming, particularly in the services sector. Manufacturing has already been weak for months. 
Fabio Panetta of Italy and Francois Villeroy de Galhau of France have hinted at more aggressive rate cuts to spur growth, while Germany’s Joachim Nagel warns against going too far. 
Investors and policymakers alike are watching Washington closely, knowing that January 20, the day Trump takes office, could bring sweeping changes to the global financial system. 
Meanwhile, the Federal Reserve is expected to follow suit with a rate cut next week after U.S. inflation data came in as expected. Central banks worldwide are moving preemptively, knowing that Trump’s policies rarely follow conventional wisdom. 
Land a High-Paying Web3 Job in 90 Days: <a href="https://www.cryptopolitan.com/crypto-career-launchpad-waitlist/?utm_source=cryptopolitan&amp;utm_medium=banner&amp;utm_campaign=ccl-waitlist-2" target="_blank">The Ultimate Roadmap</a>

Trump’s return forces European central banks to soften policies

Table of Contents

Cryptopolitan_News

Other articles published on Dec 14, 2024

Didn’t Cash In on Neiro’s ICO? This New Meme Coin Presale Has Bulls Betting Big

Qubetics’ Asset Tokenization Breakthrough Makes It a Best Cryptos to Buy for December 2024, Along...

Missing Pepe Coin’s ICO Is No Joke, But Neither Is BTFD Coin’s Current Presale Price

Former PM of Thailand and his rich friends believe Bitcoin will reach $850,000 – Calls for Thai p...

Florida Plans Strategic Bitcoin Reserve Using $1.85B from Pension Fund

Altcoins in Focus: Why This Breakout Is Bigger Than 2018’s Cycle

Join our free newsletter for daily crypto updates!