BUDAPEST (Reuters) -Central bank independence is being challenged in parts of the world and greater political influence could undermined banks' ability to keep inflation down, risking economic volatility,

The European Central Bank meets on Thursday for the first time since Donald Trump returned to office, leaving U.S. tariff threats looming over the euro zone's sluggish economy and potentially complicating the economic outlook.

Investors expect ECB policymakers to agree this week to another quarter-point rate reduction and further reductions at each of the three following meetings through June are increasingly likely.

Eurozone rate-setters are set to cut borrowing costs again this week, confident their efforts to lower inflation will remain on track despite the threat from US President Donald Trump's protectionist agenda.

The ECB has reinforced its push for a digital euro in response to Trump’s executive order promoting US dollar-backed stablecoins.

The European Central Bank needed to cut interest rates cautiously and gradually but further policy easing was likely coming given weakening price pressures, policymakers concluded last month, according to the accounts of their Dec 11-12 meeting.

With the next two ECB cuts seen as done deals, consensus PMIs won’t move the needle Data has a chance to make a return as a driver of markets today with the eurozone flash PMIs offering a fresh take on economic sentiment amid the politically changing winds.

Speaking to leaders at the World Economic Forum in Davos, Lagarde had to go onto the defensive in the face of criticism from a leading US financier.

The new Trump administration's policies may affect inflation in the United States but are unlikely to have much impact on price pressures in Europe, ECB policymaker Francois Villeroy de Galhau said on Wednesday.

The balance of macroeconomic risks has shifted from concerns about high inflation to concerns about low growth,” said vice-president Luis de Guindos in a mid-January speech. December’s change in stance has not,

The European Central Bank cut interest rates by 25 basis points to 3% at its December meeting, aiming to support a weakening eurozone economy. However, minutes from the meeting reveal a sharp divide among policymakers on how aggressive the central bank should be in its approach.

The European Central Bank is on track to lower inflation and cut interest rates but needs to have a deep think about how much further and how quickly policy should be eased, ECB board member Isabel Schnabel said over the weekend.