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Trump’s Trade Truce Is Set to Make the ECB’s Job Easier

Trump’s Trade Truce Is Set to Make the ECB’s Job Easier

(Bloomberg) --

Trump’s Trade Truce Is Set to Make the ECB’s Job Easier

The rise in uncertainty has been a key factor in pushing euro-area growth below potential and forcing the European Central Bank into a fresh round of easing. If uncertainty were to recede by about 20% from its current level, as the Trump administration dials down trade tensions, the boost to GDP could be about 0.3% by the start of 2021, putting growth back into line with potential. That would allow the ECB to wrap up its bond purchases in about two years -- Bloomberg Economics’ core scenario. A bigger drop in uncertainty -- reverting to the subdued levels seen before the start of the trade war -- could provide a major lift and allow the ECB to end its QE program a year earlier than BE anticipates.

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