The European Central Bank is ready to guarantee a solid financing of the economy and financial stability of the euro area, the political formulator of ECB François Villeroy de Galhau said on Wednesday, the day the commercial rates imposed by the United States fueled a new market turbulence.
The global markets showed more volatility on Wednesday, with the entry into force of the 104% rates imposed by the President of the United States Donald Trump in China and a wild sale of US securities caused fear that foreign funds were running away from US activities.
The economic uncertainty triggered by commercial tensions is influencing financial stability and can increase credit risk for some financial institutions, although French banks are solid, said Villeroy, which is also president of the French Central Bank.
In an annual letter to French president Emmanuel Macron, he added that the hedge fund with leverage could face the main liquidity pressures in particular.
“In this context, the Banco da France and the European Central Bank are completely mobilized to ensure that the economy is well financed and (guarantee) financial stability,” he said.
“They are monitoring to ensure that the liquidity of the financial system is good, including market stress periods,” added Villas.
The bank of France has estimated that commercial tensions with Washington could reduce the growth of the euro area of 0.25 percentage points this year, although the impact on France is probably lower.
Villeroy said that the uncertainty created by the “mutual” tariff announcement made by the Trump administration last week strengthened the topics in favor of a cut in interest rates by the ECB.
“We still have space to reduce rates,” he told journalists by introducing the letter.
Source: Terra
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