MNI INTERVIEW: Tariff War Pushes Up Inflation- ECB's Pelagidis

A trade war between the United States and Europe stemming from the former’s attempts to annex Greenland will tend to push up inflation and lower growth on both sides of the Atlantic, Bank of Greece Deputy Governor Theodore Pelagidis told MNI. 

“In general, a trade war will instantly mean higher prices, hitting at the same time growth rates. In both continents,” Pelagidis said in emailed responses to questions. “Also, transatlantic instability might lead European money previously invested in the U.S, to get back to Europe.”

Monetary policy is becoming more complicated for both the Fed and the European Central Bank as the balance between inflation and growth is changes once again, Pelagidis said. “Actually it is becoming very volatile.”

For America, “the current short-term advantages of ‘optimal tariffs’ - with the U.S. market as a monopsony - will be instantly evaporated,” he said. "So, for the U.S., lower growth, higher inflation.

"As for Europe in particular, a 'savings—investment union' might get a political push from the current U.S. economic aggressiveness." (See MNI SOURCES: ECB Monitors Markets For Fed Independence Fallout)