Central bankers such as Andrew Bailey, Jerome Powell and Christine Lagarde probably believed that the drama of rescue programs due to the pandemic of Covid and uncontrolled inflation had ended and hoped for a few years of calm and steady economic growth.

However, Donald Trump fired any hopes of theirlaunching a global “tsunami” of duties, increasing the contributions of all the goods introduced by the US from third countries to the highest level of more than one century.

The consequences of the trade war declared by the US president are already visible. His aggressive commercial policy scared economists who now reduce their predictions for growth and increase estimates of a recession of the global economy.

Trump’s “bomb” could not burst into a worse circumstance, especially for over -indebted countries.

This is because policy makers, amid increasing calls to borrow more to increase the costs of benefits, health care and defense now, now they will need to support their economies.

And here’s the central banks.

Martin Will, a former member of the Bank of England’s Monetary Policy Committee (MPC), says he believed a week ago that persistent inflationary pressures would prevent the UK Central Bank from further reducing interest rates at a meeting next month.

However, as he says, this is no longer true. It is now suspected that the MPC will reduce interest rates to boost its economy, despite the risk of Trump’s duties to rekindle the “battle” to deal with inflation.

“May return to the operating logic that prevailed during the pandemic“, He says, exporting that” when demand is weak, you relax monetary policy. “

Willem Bueter, also a former MPC member, believes that strengthening the pound will help the Bank of England relax its interest rates, adding that falling oil prices will boost this possibility.

‘The global economy, including the United Kingdom, will experience slower economic growth As a result of the tariff attack announced on Trump’s ” Liberation Day ”, he notes.

“As sterling is likely to be reinforced against the US dollar and weakened against the euro, the inflationary impact will be much milder [από] the trade war. I think the Bank of England reduces the bank interest rate slightly faster as the actual economic activity is weakening, “he added.

He estimates that the bank will proceed with others four reductions which will lead its basic interest rate to 3.5%, adding that “if the trade war is more intense, it is likely to temporarily make additional reductions in the bank interest rate below 3.5%”.

It is noted that before Trump imposes sweeping duties on all US trade partners, markets were expecting two more interest rates from the Bank of England this year. Now they see three, and perhaps another one at the beginning of next year.

Similar is the forecasts of economists for both the eurozone and the US.

The challenge for monetary policy executives is to calculate how much they can reduce interest rates to support the growth of their economies, without triggering an inflationary spiral.

Olivier Blancar, a former chief economist at the International Monetary Fund, says that although it is too early to predict how things will evolve, policy makers are probably more concerned about supporting their economies than to deal with inflation.

“Certainly The risk of a global downturn has increased significantlyand with him [η πιθανότητα να έχουμε] Low interest rates, “he says. “I think the recession will dominate against any concerns about inflation.”

Investors bet that central banks around the world will speed up its interest rates, especially the European Bank of Europe, where Goldman Sachs believes that the risk of recession is high.

Markets provide for three more interest rate cuts in the eurozone from now to September, even estimating that the next move by the European Central Bank (ECB) will probably be the interest rate reduction. at 2.25% and 1.75% by autumn.

Goldman Sachs even gives 33% of interest rates to reduce even further, which will depend on how quickly the prospects of the European economy will worsen.

Peter Pratt, who has been a leading economist at the ECB for almost a decade, bets that borrowing costs will be further reduced.

“All the data supports their cut,” he says. “Based on the logic of the ECB based on data, it should reduce. It can be added that the negative impact of extremely high uncertainty on the course of demand will enhance this possibility, “he adds.

“Admittedly, it should monitor potential upward pressures due to protectionism, but this risk should not lead to a political paralysis,” the economist notes.

Pratt warns that central banks should be ready to face more economic vibration. “I see another cut in June, but in terms of continuity, I would be more careful, as extreme situations can be unfolded.” Not sure when things will calm down: “The economy will not be in balance for a while,” he says.

For the US Federal Bank The dilemma is slightly different.

To ensure that the world’s largest economy is neither overheated nor cozy than it should be, in any case, difficult, even under normal circumstances.

But now it has the impossible mission to set an upper limit on the price increases, which are pressed upward by tariffs as they are charged with an additional tax on consumers, while trying to prevent a recession of the US economy.

The story has shown that the Fed is aggressively loosening its monetary policy during recessions.

Chris Igo, at AXA Investment Management, believes that this will be the roadmap that will follow in the present context. “I do not like to think of a world recession and a caring market,” he says.

‘However, I cannot end up in a more happy result when US government does not show empathy Opposite to the rest of the world and is ready to use strong weapons and little believable tactics to get what he seems to believe will benefit Americans. “

Not all agree with him. Dian Julius, a founding member of MPC, does not see four US interest rates, as the market is currently estimated.

After all, the mistakes made by the Fed failing to deal with persistent inflation still haunt it. “The Fed will be very cautious about letting inflation to rise again, so I don’t think it will reduce interest rates, even if the economy is slowing down,” he says.

Lower interest rates may seem to be heard as a positive development for borrowers, but it is unlikely that they will offset the “pain” of slower growth.

Andrew Gudwin, in Oxford Economics, says that traffic in markets means that the Bank of England may expect that there will be more room than in its intermediate report.

However, he adds: “When the Budget Responsibility Office is called upon to inform its forecasts, I suspect that the impact of changes in the pricing of financial markets will be offset by the changes in broader financial forecasts and the need to increase defense spending beyond 2.5%.”

This can merely signal the principle of chaos, as policymakers are trying to monitor and predict the impact and results of the trade war.

It is quite difficult for central bankers to calculate How should they only react to Trump’s dutiesbut duties are not the only factor that concerns them.

China responded by imposing reciprocal duties, the EU is considering retaliation, and Trump has not yet decided what to do with many sectors, such as the pharmaceutical industry, which has so far escaped duties. In addition, the eccentric US president sometimes acts without warning.

The Bank of England has a deadline until May 8 to decide what to do.

This is a relief, Will says: “Given the pace at which Trump changes his mind – he has said he will not change his mind about these duties, but it can change his mind – I think he is lucky that he does not need to make a decision this week.”