No Pause in May, ECB Must Hike by either 25BP or 50BP, Šimkus Says

16 April 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank cannot pause at its May meeting and should hike its key interest rates by either 25bp or 50bp, Governing Council member Gediminas Šimkus said on Sunday.

In an interview with Bloomberg, Šimkus, who heads the Bank of Lithuania, said, ‘I believe we can't pause in our May meeting. But whether 25 or 50bp, if you want to ask… let's see, we depend on data.’

He said that the ECB’s work was ‘not done… inflation is still there, it is broad-based, it is stubbornly high, it is too high for too long, and we need to fight it.’

Although core inflation was proving sticky, he expected it to peak in the coming months. He said that ‘this very sticky core inflation, it's peaking at the moment and maybe next month or a couple of months later, it will reach its peak.’

‘But what can be said about core inflation… it is sticky and it's stickier what was thought before.’

European economies have proven ‘to be more resilient than expected before’, he said, noting that growth was holding up despite downside pressures.

Inflation expectations were anchored, and the ECB was within touching distance of its target in the medium term, according to the central bank’s projections, he said: ‘For 2025, [inflation] definitely goes down as we see in the macroeconomic projections. Yes, it's still a little bit above two [per cent] but we still have some room for manoeuvre and inflation expectations are well anchored.’