| I’m Craig Stirling, a senior editor in Frankfurt. Today we’re looking at how the European Central Bank is confronting the era of Donald Trump. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X via @economics. And if you aren’t yet signed up to receive this newsletter, you can do so here. How should central bankers confront the tumult of a world disrupted by Trump? That’s a question Christine Lagarde addressed on Wednesday, in a speech helpfully accompanied by the US president’s escalation of rhetoric and trade tariffs just within the previous 24 hours. In contrast to her Federal Reserve counterpart, Jay Powell, whose own remarks last week stayed circumspect beyond acknowledging “elevated levels of uncertainty,” the European Central Bank chief didn’t hold back. The job of policymaking isn’t easy at the best of times, but it has now got much harder, she says. “We have seen political decisions that would have been unthinkable only a few months ago,” Lagarde observed at a conference in Frankfurt. “The level of uncertainty we are facing is exceptionally high.” Given that situation, the ECB itself isn’t clear about what to do next. Policymakers cut interest rates by a quarter point last week, but haven’t offered a clear signal on whether they will do so again or pause at their decision in April.  Christine Lagarde Photographer: Simon Wohlfahrt/Bloomberg Lagarde didn’t address the immediate outlook, but described a global backdrop that illustrated how tough it is for her and colleagues to make clear-headed judgments. Both geopolitical risk and trade policy uncertainty are particularly high, she said, and the shocks hitting the economy can have “two-sided” consequences. “Maintaining stability in a new era will be a formidable task,” she said. “It will require an absolute commitment to our inflation target, the ability to parse which types of shocks will require a monetary reaction and the agility to react appropriately.” So bear with us as we confront a period of greater volatility and the need for judicious policymaking, Lagarde seems to be telling investors. The ECB president also offered hints on how she plans to communicate. It’s harder to offer a clear path for rates in an environment beset by shocks, she said, so we’ll just have to explain how we take decisions instead. “Laying out a clear reaction function is critical to tempering volatility in a world of exceptional uncertainty,” she said. “The public must understand the distribution of possible outcomes ahead and how the central bank will react.” Maybe there’s a final message in Lagarde’s remarks on how to cope with Trump: don’t talk about him. Despite his central role in jolting the world economy, she never once namechecked the president, or his administration. Don’t Miss the Latest Trumponomics Podcast | We try to understand a possible “Mar-a-Lago Accord” and the views of Stephen Miran, nominee to lead the White House Council of Economic Advisers. Host Stephanie Flanders is joined by with guests Shawn Donnan, senior writer for economics with Bloomberg, and Mark Sobel, the US chairman of the Official Monetary and Financial Institutions Forum. Listen here and subscribe on Apple, Spotify, or wherever you get your podcasts. The Best of Bloomberg Economics | - Ukraine accepted a US proposal for a 30-day truce with Russia as part of a deal with the Trump administration to lift its freeze on military aid and intelligence for Kyiv.
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Central banks have started to target more specific inflation levels over the past decades but have allowed more leeway in when to achieve them, reflecting a growing influence of secondary objectives on their decisions. A Bank for International Settlements analysis of regimes used by 26 monetary institutions found that goals including employment, growth and financial stability are increasingly taken into account aside inflation because longer time horizons allow officials do so. This shift has taken hold in advanced economies more than in emerging markets, according to the paper published on Tuesday. Claudio Borio — the former head of the BIS’s monetary and economic department — and BIS senior economist Matthieu Chavaz found that since inflation targeting was first practiced in New Zealand in 1990, confidence in the framework has grown. This together with previously low global inflation has contributed to the greater flexibility. “The adaptability of the inflation targeting framework has no doubt been one factor behind its durability,” they wrote. “It will be especially interesting to see how the recent surprising surge in inflation will influence the next adjustments.” | 
