ECB’s Šimkus: Probability of Rate Cut to Rise Sharply After April

17 January 2024

By David Barwick – VIENNA (Econostream) – European Central Bank Governing Council member Gediminas Šimkus on Wednesday said that the likelihood of ECB policy easing would grow as the year 2024 progressed and in particular following the month of April.

Speaking on the margins of Euromoney’s Central and Eastern European Forum, Šimkus, who heads the Bank of Lithuania, said, ‘The further we get into the year, the higher the probability will become that we will cut rates.’

‘Unless something very unexpected happens, I see the probability of a move right now as near zero’, he elaborated. ‘We are in the last mile in the fight against inflation and it is risky to declare victory prematurely. We have to make sure before a cut that this move is supported by data, especially data on wage growth and its deceleration.’

‘Once we get into April, it gets harder to exclude anything, but from my point of view today, the probability of a cut won’t turn really significant until we’re in June’, he said.

Following the 11 April monetary policy meeting, the ECB Governing Council’s next such gathering will be on 6 June, at which time the outcome of important wage negotiations would be largely known and updated macroeconomic forecasts would be unveiled, he noted.

‘It all comes down to whatever the data tell us about the sustainability of the disinflation process, but I could see us loosening policy in June or in any case with a high probability before summer holidays’, he said. ‘But March, no way, unless there is some huge surprise, and April is only a little more likely than March.’

‘Financial markets aren’t going to make the decision for us’, he added.