FRANKFURT (Reuters) - European Central Bank chief Mario Draghi said on Thursday that growing trade friction could hurt business confidence and economic growth, and thereby impact the slow recovery in inflation rates in the euro zone.
“We have to see what the exchange of - so far - rhetoric, about protectionism will produce. If we have an increase in tariffs, an increase in protectionism, there may be direct effects,” Draghi said at a news conference after ECB rate-setters left policy on hold.
“We can’t know now what are going to be the direct effects of potential retaliation. What is certainly known is that the events have a profound and rapid effect on confidence...and confidence can in turn affect the growth outlook,” he said.
This risk has become more prominently recently, Draghi said.
“We’ll have to see basically how the growth outlook could alter what is the convergence of the inflation rate to our objective,” Draghi said.
Reporting by Francesco Canepa; Editing by Hugh Lawson