G-7 central banks prepare first responses to Trump's tariff chaos

WASHINGTON: The first Group of Seven monetary policy decisions since President Donald Trump's trade war unleashed global market turmoil may prompt diverging responses from either side of the Atlantic.

While Bank of Canada officials on Wednesday could keep borrowing costs on hold to guard against the potential inflationary impact of an ongoing tariff battle with the US, the European Central Bank is now widely anticipated to reduce interest rates the following day.

The next Federal Reserve decision isn't until May 7, so this week's meetings put the onus on policymakers in Frankfurt and Ottawa to soothe investors while assessing the economic fallout from Trump's action.

The US president has paused many of the harshest elements of his promised tariffs - with actions against China the exception - but market volatility and pervasive uncertainty may inflict damage too. ECB President Christine Lagarde hinted at those risks on Friday, saying officials are monitoring the situation and have tools available, and that price stability and financial stability go hand-in-hand.

This is the second time in just over two years that she and colleagues find themselves puzzling over a rate decision in the wake of turmoil emanating from the US, but before Fed policymakers met. After the collapse of Silicon Valley Bank prompted market ructions in 2023, the ECB opted not to blink, and delivered a promised half-point hike.