According to the Zhitong Finance APP, Olli Rehn, the Governor of the Bank of Finland and a member of the European Central Bank's Governing Council, stated that U.S. tariff policies may lead to a short-term decline in inflation in the Eurozone, known as the &#34;anti-inflation&#34; trend. However, it is difficult to accurately predict the overall impact on the European economy and long-term inflation. Almost simultaneously, one of the most &#34;hawkish&#34; monetary policy decision-makers at the Bank of England (BOE), Megan Greene, indicated that the Trump administration's global tariff policies are more likely to suppress prices in the UK rather than raise inflation. The information revealed by these two central bank officials from Europe suggests that the European Central Bank and the Bank of England may continue to implement interest rate cuts due to the ongoing cooling of inflation, rather than adopting a cautious stance of pausing rate cuts.
Also on Tuesday, the European Central Bank's quarterly professional forecast survey report showed that inflation indicators for the Eurozone in 2025 and 2026 will be only slightly higher than the previous expectations indicated by the ECB survey (investors generally predicted a significant rise in inflation expectations before the survey was released). The latest inflation expectations are 2.2% and 2%, respectively, but still show a significant cooling trend in prices compared to 2023-2024. The inflation expectations for 2027 and beyond remain at 2% (the ECB's price stability target is anchored at 2%).
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Among the members of the ECB Governing Council, Rehn, who has maintained a &#34;neutral&#34; monetary policy stance for a long time, stated: &#34;In the short term, the impact on consumer price growth in the Eurozone may be downward.&#34; &#34;The impact of tariffs on inflation rates is contradictory. In the U.S., tariffs will accelerate inflation, but in the Eurozone, the effects of Trump's tariff policy have two directions: on one hand, there is upward price pressure from the tariff costs passed on to domestic consumers, and on the other hand, it suppresses demand, significantly reducing inflation.&#34;
&#34;The impact of inflation on inflation in the Eurozone is not necessarily upward. Most economists previously almost unanimously believed that tariffs would lead to a weaker euro. But that is not the case; on the contrary, the euro has been very strong against the dollar recently,&#34; Rehn said in an interview with the media on Tuesday. Rehn made his remarks at the start of discussions on the Finnish government's budget framework for 2026 to 2029.
&#34;If China shifts its exports to the European market due to high U.S. tariffs, if energy prices fall, and if the euro strengthens, then tariffs will not lead to accelerated inflation in the Eurozone,&#34; Rehn stated.
However, Rehn noted that the Eurozone economy may trend downward due to the Trump administration's tariff policies on automobiles, auto parts, steel, and aluminum imposed on the EU, as well as more potential industry tariffs. &#34;However, the new round of global trade war initiated by the Trump administration has created significant uncertainty, reducing the growth trend of the Eurozone economy.&#34;
Regarding the news dynamics of the Trump administration's attempts to interfere with the independence of the Federal Reserve, Rehn stated in the interview: &#34;Recent comments questioning the independence of the Federal Reserve further undermine market confidence.&#34;
Raine's view that Trump's tariff policy may lead to a short-term decline in inflation aligns closely with that of a Bank of England official, both emphasizing that the risks of disinflation from U.S. tariff policies outweigh the risks of rising inflation for the region's economy.
Megan Greene, one of the most hawkish monetary policy decision-makers at the Bank of England (BOE), stated that the global wave of tariffs led by the Trump administration is more likely to significantly lower prices in the UK rather than continuously push up inflation.
In an interview with the media on Tuesday, Greene, who has maintained a strong stance on monetary policy for a long time, mentioned that she had previously taken a cautious approach in the Bank of England's Monetary Policy Committee (MPC) mainly due to concerns about supply-side constraints, still high wage growth rates, and the persistence of inflation in the service sector. However, she added, &#34;I think these tariffs are actually more likely to bring about deflationary risks rather than inflationary risks. We need to observe further developments.&#34; Greene also pointed out in the interview that the White House's trade policies could trigger larger fluctuations in financial markets.
&#34;Although tariffs are expected to push up prices in the U.S., the UK may experience a completely opposite disinflationary effect due to cheap Asian exports shifting to Europe, a weaker dollar, and a slowdown in European economic growth suppressing demand,&#34; Greene said regarding the inflation trend in the UK. &#34;I think tariffs are actually more like a risk of disinflation rather than a risk of rising inflation. Therefore, we must see how the economy develops in the future.&#34;
When asked about Trump's criticism of Federal Reserve Chairman Powell and his attempts to fire Powell, Greene emphasized, &#34;It is crucial for central banks to maintain independence; credibility is the currency of central banks, and independence is its core.&#34;
Since last summer, the Bank of England's Monetary Policy Committee (MPC) has adhered to a gradual pace of cutting interest rates once a quarter, but the negative impacts of U.S. tariff policies have intensified market expectations for the Bank of England to accelerate its easing process this year. Traders in the interest rate futures market expect the Bank of England to cut rates at least three more times before the end of the year, with the probability of a fourth cut exceeding 50%.
On Tuesday, a team of economists at Bank of America raised their forecast for the Bank of England's rate cuts this year from three to four, stating that rates could drop as low as 3.25% next year. The Bank of England will announce its next interest rate decision on May 8.
Last week, the European Central Bank (ECB) lowered its benchmark interest rate by 25 basis points to 2.25%, marking the seventh cut in this round of easing, aimed at boosting the already struggling eurozone economy, which is facing severe shocks from U.S. tariffs since President Trump implemented reciprocal tariffs on April 2. As ECB officials begin to suggest that U.S. tariffs may lower European inflation rather than raise it, expectations for continued rate cuts by the ECB are bound to rise significantly.
In its policy statement, the ECB emphasized that trade tensions have worsened the growth outlook for the European economy and created &#34;exceptional uncertainty,&#34; while removing references to interest rates being at &#34;restrictive levels.&#34; The latter is typically seen as a signal to slow the pace of rate cuts, but ECB President Lagarde explained that assessing policy stance using unobservable neutral rates during economic shocks is &#34;meaningless,&#34; a statement that reassured the market
Some economists emphasize the risk that inflation may fall below the central bank's target. For example, Citigroup predicted before the European Central Bank meeting that the inflation rate in the eurozone will drop to 1.6% next year and 1.8% by 2027. This poses a potential challenge for the European Central Bank, which struggled with inflation below target levels for many years before the COVID-19 pandemic

Officials from the Bank of England and the European Central Bank stated that the tariff policy of the Trump administration may reduce inflation in the short term rather than push up prices. Olli Rehn, the Governor of the Bank of Finland, pointed out that the impact of tariffs on inflation in the Eurozone is complex and may lead to downward pressure on prices. Megan Greene from the Bank of England also believes that tariffs will lower prices in the UK. This suggests that the two central banks may continue to cut interest rates due to the sustained cooling of inflation, rather than pause rate cuts. The latest forecasts indicate that inflation in the Eurozone will be slightly above 2% in 2025 and 2026

- Finnish central bank governor Olli Rehn indicated that U.S. tariff policies may temporarily lower inflation in the Eurozone, but the long-term effects on the European economy remain uncertain.  
- Concurrently, Bank of England's Megan Greene suggested that these tariffs are more likely to reduce prices in the UK rather than increase inflation, signaling a potential continuation of interest rate cuts by both central banks.  
- Recent ECB forecasts show inflation expectations for 2025 and 2026 slightly above previous estimates, yet still indicate a significant cooling trend compared to 2023-2024 levels.

Can't stop the rate cuts? Officials from the European and British central banks expect tariffs to lower inflation