ECB Officials Divided as Interest Rates Near Bottom and Global Trade Tensions Loom

Economic

Summary:

With eurozone interest rates approaching their lowest point after seven consecutive cuts, European Central Bank policymakers are increasingly divided over the future course of monetary policy...

ECB Approaches Policy Crossroads Amid Diminishing Room to Cut Rates

After initiating a monetary easing cycle in July 2024, the European Central Bank (ECB) has reduced interest rates seven times, bringing the deposit rate down to 2%. As markets anticipate another cut in June, internal disagreements within the ECB are surfacing over whether further reductions are warranted or if it is time to pause and reassess.

Speaking to CNBC, Latvia's central bank governor Martins Kazaks acknowledged that the ECB may be nearing the bottom of its current easing trajectory. While inflation is aligning with the 2% target under the ECB’s base scenario, he warned that external uncertainties—particularly from global trade—could rapidly alter the policy landscape. Although Kazaks left the door open for one or two more cuts, he emphasized a need to monitor the trajectory of global trade negotiations closely before proceeding.

Diverging Views on Inflation and External Risks

French central bank governor Francois Villeroy de Galhau expressed a more dovish stance in an interview with French outlet EBRA. He believes Europe remains insulated from the inflationary effects of U.S. trade protectionism and foresees room for one more rate cut over the summer. According to Villeroy, Trump’s tariff-driven inflation in the U.S. is unlikely to spill over into the eurozone, thus justifying additional monetary support.

In contrast, ECB Executive Board member Isabel Schnabel offered a more cautious—and arguably hawkish—view. Speaking at Stanford University, Schnabel argued that rates are already sufficiently accommodative and that the central bank should maintain its current stance to retain policy flexibility. She warned that while near-term inflation may fall below target due to low energy costs, a strong euro, and subdued demand, medium-term inflation risks are tilted to the upside due to fiscal expansion and global supply disruptions.

Tariffs and Fragmented Supply Chains Complicate Outlook

Schnabel highlighted two key sources of inflationary risk. First is the expected rise in government spending across the eurozone, particularly in Germany where new commitments to defense and infrastructure are expanding the fiscal footprint. Second is the growing threat of trade fragmentation—a byproduct of tariff wars led by the U.S.—which could raise production costs and stoke inflation by disrupting global supply chains.

She also challenged the notion that U.S. tariffs would result in eurozone deflation if the EU refrains from retaliating. Even without direct countermeasures, higher global production costs could be transmitted through international supply networks, neutralizing any deflationary impact of weaker global demand and potentially lifting eurozone inflation.

Markets Price In One More Cut After June

Despite the ongoing debate, market expectations remain anchored around a June rate cut. Futures pricing currently implies a 90% probability that the ECB will lower the deposit rate on June 5, with the rate potentially bottoming at 1.75% before year-end. However, expectations for further easing beyond this point remain subdued, suggesting that investors are preparing for a cautious, data-dependent ECB in the second half of 2025.

The ECB now stands at a critical juncture. While some policymakers argue for continued easing to support demand and reinforce the inflation target, others caution that long-term risks—especially those tied to fiscal stimulus and global trade fragmentation—may soon outweigh the benefits of lower rates.

This divergence reflects the broader challenge facing modern central banks: balancing short-term disinflationary trends with structurally emerging inflation risks in a world of geopolitical shocks, protectionism, and post-pandemic policy shifts. For the ECB, preserving policy flexibility may be the most prudent course—especially as Europe braces for a potentially turbulent global economic phase in 2025.

Source: Euronews

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Gerik

Economic

Commodity

Nearly 90,000 Tons of Strategic Food Reserves Headed to Market

Vietnam's General Department of State Reserves (Cục Dự trữ Nhà nước) has officially initiated the release of a significant volume of national food reserves, totaling close to 90,000 tons. According to Official Letter No. 419/DTNN-TCQLH issued by the department, this release stems from the 2024 rotational sales plan that has not yet been completed and will now be carried over into 2025.

Specifically, the department has authorized its regional branches to organize the auction of 40,000 tons of paddy (harvested and stored in 2022) and over 49,519 tons of rice (stored in 2023). The sales will be conducted through a competitive public auction process, in accordance with the Law on Property Auctions and relevant amendments.

Auction-Based Sale with Pricing Governed by State Guidelines

The sales will be carried out by regional Reserve Units under the standardized procedures set out by Vietnam’s Ministry of Finance and the amended Property Auction Law. All transactions will be executed transparently through public bidding to ensure market fairness and alignment with national fiscal policy.

Regarding price setting, the regional Reserve Units must apply the comparative pricing method specified in Section 3, Chapter II of Circular No. 45/2024/TT-BTC. This circular outlines Vietnam’s general valuation framework for goods and services priced by the state. The starting prices determined from these evaluations must be submitted for final approval by the Director of the General Department of State Reserves.

Compliance Timeline and Documentation Requirements

To ensure procedural rigor and coordination, the General Department has mandated that all regional offices finalize and submit the complete dossiers—detailing the proposed starting prices and valuation justifications—no later than May 26, 2025. These documents must comply with the guidelines laid out in Circular No. 25/2025/TT-BTC and amendments to Circular No. 89/2015/TT-BTC governing national reserve goods management.

The rotational sale mechanism is designed to maintain the freshness and quality of national reserves while also contributing to market stability. The sale not only ensures effective stock turnover but can also serve as a policy tool to stabilize food prices in times of volatility or surplus.

This move reinforces the dual role of the State Reserve system: safeguarding national food security and serving as an economic buffer during disruptions. It also demonstrates institutional transparency and a commitment to market-based mechanisms in the management of public resources.

The auction of nearly 90,000 tons of state-held rice and paddy signals Vietnam’s continued efforts to optimize its reserve management system. By extending the 2024 rotational plan into 2025, the government is both preserving the functional quality of its food reserves and enhancing economic efficiency. Through structured public auctions and regulated pricing, the State Reserve system is fulfilling its mandate to balance market needs with national security objectives.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

ASEAN Resurrects Monetary Fund Ambition in Response to Global Shifts

Southeast Asian nations are reinvigorating plans to establish their own regional monetary fund, signaling a significant evolution in ASEAN’s financial strategy. The proposal, long discussed in economic forums but yet to be fully implemented, is now gaining momentum as regional leaders seek greater autonomy in monetary cooperation and trade settlement.

Speaking to international media outlet TV BRICS during a visit to Kazan, Russia on May 17, Malaysian Prime Minister Datuk Seri Anwar Ibrahim revealed that ASEAN member states are actively discussing mechanisms to launch a monetary fund modeled in part on the Chiang Mai Initiative—a multilateral currency swap agreement formed in response to the 1997 Asian financial crisis.

Local Currency Integration Gains Traction

Anwar cited ongoing efforts among the central banks of Thailand, Indonesia, and China to conduct up to 20% of their trade using local currencies. This figure, amounting to several billion dollars, reflects a broader push toward financial de-dollarization in the region. While the U.S. dollar remains dominant in global finance, ASEAN leaders are increasingly exploring practical steps to hedge against currency volatility and external financial shocks.

The initiative is part of a growing movement across emerging economies to reduce dependency on the dollar for trade and reserves—a trend accelerated by geopolitical instability, interest rate uncertainty, and the fragmentation of global financial systems.

Malaysia to Host Economic-Focused ASEAN Summit

Malaysia will host the upcoming ASEAN Summit on May 26–27, where economic resilience and financial innovation will dominate the agenda. According to Prime Minister Anwar, this summit presents a strategic opportunity to formalize steps toward a regional financial mechanism and to reaffirm ASEAN’s commitment to multilateral, rule-based cooperation.

The summit is expected to attract key ASEAN trading partners, creating momentum for agreements that could lay the groundwork for a future ASEAN Monetary Fund (AMF). This proposed institution would potentially operate alongside existing frameworks like the Chiang Mai Initiative and the Asian Development Bank, offering member states emergency liquidity support, technical assistance, and coordination for macroeconomic stability.

Reducing Risk and Enhancing Regional Sovereignty

The potential AMF reflects a desire not just for financial independence, but also for strategic economic insulation in an increasingly volatile global environment. It would allow member nations to respond more effectively to capital outflows, external debt crises, or trade disruptions—particularly in a region that is deeply integrated into global supply chains.

Beyond risk mitigation, such a fund could facilitate investment in ASEAN-led infrastructure, green finance, and digital transformation initiatives, reinforcing the bloc’s position as a cohesive economic entity in the Indo-Pacific.

A Regional Response to a Multipolar Financial Future

ASEAN’s revived plan to establish a regional monetary fund represents a decisive move toward financial self-determination. While the U.S. dollar is likely to remain central to global markets in the near term, Southeast Asia’s pursuit of local currency integration and collective financial instruments suggests a long-term shift toward a more multipolar monetary order.

If successful, the initiative could provide ASEAN with greater control over its economic destiny, reduce exposure to global shocks, and position the region as a model for cooperative financial governance in the Global South.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

China–U.S. Trade War

Economic

Washington Shifts from Diplomacy to Direct Tariff Enforcement

On May 16, President Donald Trump confirmed a strategic pivot in U.S. trade policy: rather than continuing bilateral negotiations with over 150 countries, his administration will issue formal notices outlining new tariff rates within 2–3 weeks. This decision effectively ends efforts to secure comprehensive trade deals before July and signals a turn toward aggressive, unilateral action designed to accelerate trade realignment.

The shift stems from logistical reality. Trump acknowledged at a business roundtable in the United Arab Emirates that negotiating simultaneously with dozens of countries is infeasible. The unilateral notification method, he argued, allows Washington to move swiftly while pressuring trading partners into compliance with U.S. demands—framing it as a question of administrative efficiency and strategic leverage.

From Negotiation to Imposition: A New Phase in U.S. Trade Strategy

The policy marks a hardening of Trump’s tariff doctrine, originally unveiled in April, which proposed a sweeping 50% duty on imports from around 60 countries and a baseline 10% tariff on all other foreign goods. While the plan was temporarily suspended for 90 days in response to market backlash, Trump is now prepared to implement it without further dialogue—excluding only China, with which the U.S. reached a provisional agreement.

This new approach represents a break from diplomatic multilateralism and signals a return to Trump’s “America First” economic agenda. By circumventing direct negotiations, the administration is prioritizing short-term control over longer-term consensus-building.

Global Markets and Allies Brace for Repercussions

Trump’s announcement has rattled major U.S. trade partners such as the European Union, Japan, and South Korea. These nations now face the risk of being subjected to blanket tariffs without recourse to tailored negotiations. Even countries that maintain trade surpluses with the U.S. could find themselves penalized, as the tariff system appears designed to apply uniformly rather than in proportion to trade imbalances.

The only exception so far—Britain—secured a preferential framework involving only the 10% baseline rate and specific sectoral tariffs. This has led to skepticism among other allies about whether similar deals are still achievable, or if the U.S. is moving toward a transactional, winner-takes-all model.

Economic Risks of Escalating Trade Wars

Economists are warning that unilateral tariffs could drive up prices of imported goods, increase production costs, and ultimately hurt American consumers and manufacturers. The chain reaction of retaliatory tariffs would also threaten global supply chains and dampen business confidence.

While Trump's administration defends the policy as necessary to reduce the U.S. trade deficit and protect domestic industries, many experts argue it could backfire. A prolonged period of tariff uncertainty could slow global growth, undermine financial markets, and strain diplomatic ties with key allies.

Short-Lived Calm with China, Prolonged Tension Elsewhere

Although recent U.S.–China negotiations yielded a temporary tax reduction agreement, the 90-day window to reach a broader settlement is rapidly closing. Talks with other strategic partners in Asia, including Japan and South Korea, have slowed, further weakening the prospects of near-term multilateral resolutions.

Trump’s strategy now appears less about forming new economic alliances and more about enforcing compliance through trade pressure. This tactic may resonate with domestic political supporters but raises concerns over rising geopolitical friction and the erosion of trust in international trade norms.

Unilateralism Risks Diplomatic and Economic Fallout

The Trump administration’s decision to impose tariffs without negotiation underscores a significant escalation in global trade tensions. While intended to secure U.S. economic interests and leverage, the approach risks triggering retaliatory measures, damaging strategic alliances, and injecting instability into already fragile financial markets.

With trade diplomacy replaced by direct enforcement, the U.S. may soon find itself navigating a more fragmented, reactive global economy—one where economic influence comes at the cost of cooperation, and strategic gains may be undermined by unintended consequences.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Devin

Economic

Central Bank

The initial tariff announcement in early April was so draconian — such an aggressive fiscal tightening — that it looked as though the White House was going to unilaterally push the US economy into recession.

Since then, of course, the tariffs have been dialed back considerably. And while technically what we’ve seen is a series of 90-day delays, the widespread expectation is that we’re not going to go back to anything like what we saw in that initial chart that Trump held up on April 2.

There are still reasons to be concerned about the new baseline level of tariffs. Doing business in the US has become more costly. Supply chains may be re-structured in such a way so as to become less efficient and productive. Personally, my main concern is that US businesses themselves become less competitive (because they enjoy some increased level of protectionism) creating an ongoing degradation of their productivity. But these are longer-term structural worries. (Brexit is probably a decent analogy at this point).

But at least in the short-term, just strictly from a cyclical perspective, it looks less and less like the tariffs will grind business to a halt as was the worry a month ago.

So to my mind, the focus has to return to the Fed, and the speed with which it responds to underlying economic conditions. How are underlying economic conditions? They seem ok, but not great.

This is something that Neil Dutta has been warning about in the newsletter, both this week, and also back in February. The US labor market hasn’t fallen off a cliff, but it is decelerating. Housing activity continues to be pressured by high interest rates. Just today we got data showing that housing starts rose by just 1.6% in April (lower than the 3.0% that economists had expected) and building permits actually shrunk by 4.7% in the month. Most sentiment measures are still dismal. We got another ugly regional business survey this morning from the Empire Fed. Also just as I’m typing this, we got the May Preliminary UMich Sentiment report of consumers, which fell to its second lowest reading ever.

Today on the podcast, we had the pleasure of talking to Atlanta Fed President Raphael Bostic about setting monetary policy during a period of such extreme uncertainty. As of right now, after the pause with China, he sees just one rate cut as being appropriate in 2025. As he sees it, we’ve only gotten modestly more clarity on the trade picture, and so there’s a reluctance to act more forcefully.

It makes sense that the Fed doesn’t want to make any major moves when there’s so much that’s seemingly up in the air. And the fact that inflation expectations (again, as seen in today’s UMich report) are rising creates a further reluctance to do cuts. But from a recession standpoint, this is probably the source of concern and risk — that the data continues to decelerate and eventually reverse, before the Fed feels comfortable acting against it.

As mentioned, today we had the pleasure of talking to Atlanta Federal Reserve Bank President Raphael Bostic. We discussed the overall economic picture, tariffs, his outlook for monetary policy and his process for setting policy in a time when conditions seem to change by the day.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Damon

Economic

Forex

In a sign of shifting capital flows, Canadian investors acquired $15.6 billion worth of foreign securities in March, most of it in U.S. bonds, while foreign investors pulled $4.2 billion from Canadian markets, according to data released by Statistics Canada. This net outflow of $19.9 billion marked the second consecutive month of capital leaving Canada and brought the first quarter’s total outflow to $45.9 billion.

The investment spree by Canadian investors focused primarily on U.S. fixed-income assets, with March seeing $9.3 billion in U.S. bond purchases and an additional $1.8 billion in American government money market instruments. At the same time, investors trimmed their holdings of non-U.S. foreign debt by $1.8 billion, underscoring a clear preference for U.S. assets amid uncertain global macroeconomic trends.

Canadian appetite for foreign equities also remained solid, though moderated from a February surge. In March, Canadians acquired $7.0 billion in foreign equities, led by $5.0 billion in U.S. shares, following a blockbuster $29.9 billion investment in February, just before the S&P 500 pulled back slightly from its record highs.

On the other side of the ledger, foreign investors continued their retreat from Canadian equities, divesting $12.0 billion in March following an even steeper $21.9 billion exit in February. Those moves reflected broad disinvestment in banking, trade and transportation, and energy and mining sectors, all of which saw equity valuations dented amid a 1.9 percent drop in the S&P/TSX Composite Index.

Despite backing away from Canadian stocks, global investors increased their exposure to Canadian bonds, acquiring $11.9 billion in March. Most of this was concentrated in federal government debt with $13.1 billion in bond purchases, offset only in part by exits from federal government enterprise issuance.

However, non-residents also pulled $4.1 billion from Canadian money market instruments, primarily targeting federal government paper, which declined by $4.4 billion. The juxtapositions suggest that while Canadian debt remains attractive for longer durations, short-term instruments are falling out of favor among global investors.

This trend holds deeper significance as it may reflect growing investor caution toward Canadian markets amid heightened trade and policy uncertainty. With ongoing tensions surrounding North American supply chains and global tariff policies, investors appear increasingly reluctant to commit capital to Canadian assets that may be exposed to regulatory or geopolitical volatility.

The Bank of Canada’s decision in March to cut its policy rate to 2.75 percent may have helped sustain foreign demand for long-term government bonds even as equity markets softened. The Canadian dollar, meanwhile, posted a modest 0.4 percent gain against the U.S. dollar, aiding returns for some foreign bondholders hedging currency exposure.

Source: Investing

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Kevin Du

Political

The Friday meeting between Ukrainian and Russian officials, the first direct engagement of its kind in some three years, has ended, according to Turkey’s foreign ministry, and lasted a little under two hours.

Each side will in the aftermath convey to the press its version of things, and Ukraine has been right out the gate telling CNN that there was nothing meaningful to come out of these first talks.

A Ukrainian source said the Russia delegation "did not have a mandate to make important decisions" and that "they are not ready to decide anything meaningful to end the war."

Turkish Foreign Minister's Press Office/EPA/Shutterstock

Many international headlines Thursday described the team of junior officials sent by the Kremlin as an 'insult' to the peace process; however, it's also the case that no matter who President Putin sends, he is the one who will ultimately make the decisions.

Wall Street Journal has described that "The talks, in the Dolmabahçe Palace in Istanbul, came about as the result of President Trump’s pressure, so far mostly applied on Ukrainian President Volodymyr Zelensky, to find an end to the war."

But, "Just as the negotiations started, Russia struck near the Ukrainian city of Dnipro with a salvo of ballistic missiles, according to local officials."

And Reuters agrees in its assessment that there are "no apparent sign of progress so far in narrowing the gap between the sides, and a Ukrainian source called Moscow's demands 'non-starters'.

Ukrainian Foreign Ministry via AFP

Neither side has so far offered no major concessions, and issues like permanent control over Crimea and the four eastern territories remain sticking points for Moscow.

During the Istanbul meeting, according to WSJ's foreign correspondent Yaroslav Trofimov:

Russia demanded in Istanbul that Ukraine withdraw its troops from four regions — areas that Moscow has been trying to conquer but failed since 2022 — as a precondition for ceasefire. That’s an area twice the size of the country of Lebanon and home to more than a million Ukrainians. Not going to happen.

Donetsk, Luhansk, Zaporizhzhia, and Kherson were annexed in 2022, declared part of the Russian Federation, but Moscow forces still don't have 100% control over them.

And it doesn't look like there was any progress on achieving a Trump and Zelensky-backed 30-day ceasefire. Moscow sees this as a tactic for Ukraine forces to simply rearm and regroup, at a moment they are in dire need of more manpower and artillery.

President Zelensky has meanwhile been making clear that Ukraine will not surrender its territory as "this is Ukraine's land" - and he isn't so much as ready to even offer Crimea. Zelensky and European leaders are reportedly holding a phone call with US President Trump in the wake of the Istanbul meeting.

They will likely try to convince the US leader that attempts to negotiate an end to the war with Putin are futile. This seems to have been Zelensky's aim all along: getting Washington and Trump back on his side, and securing the unending flow of weapons, cash, and intelligence.