ECB’s Šimkus: Data Have Been as I Expected; Can Afford to Start Cutting Interest Rates

6 May 2024

By David Barwick – VILNIUS (Econostream) – European Central Bank Governing Council member Gediminas Šimkus on Monday said that current thinking regarding monetary policy was the same as two weeks ago and that interest rate cuts could start.

Speaking at a press conference, Šimkus, who heads the Bank of Lithuania, said of the latest macroeconomic data, ‘That’s the data I expected before … so I keep my thinking the way it was a couple of weeks ago. And my opinion was that we can afford a less restrictive environment, and … we clearly see this disinflation process and inflation approaching to our target. Therefore, we can afford starting the interest rate cuts.’

It was ‘very difficult’ to prognosticate the precise number of rate cuts that would take place by year’s end, he said.

‘Having said this, I do see that the economy is developing more or less broadly in accordance with the baseline, and unless we see some surprises in data or materialisation of uncertainties in the world or the geopolitical scene - and we’ve seen this before, so I need to admit it, but I also admit that starting cutting … cannot be limited to … “cut in June and then let’s see.”’

The ECB would of course have to continue being data-dependent, he continued, ‘but if everything evolves the way it should evolve and the way it’s in the baseline, my thinking is that there are coming some other interest rate cuts in the future, but I will restrict myself from elaborating how many, even if I have already expressed that this year, I would expect three cuts…’

ECB monetary policy would remain restrictive after those three rate cuts, Šimkus confirmed.