ECB’s Šimkus: More Interest Rate Cuts Possible In 2024

7 June 2024

By Aurėja Bobelytė – VILNIUS (Econostream) – European Central Bank Governing Council member Gediminas Šimkus on Friday said that it would be possible for the ECB to cut interest rates again this year.

During a press conference in Vilnius, Šimkus, who heads the Bank of Lithuania, said, ‘If economic developments match those in the forecasts, this will mean less and less need for restrictive monetary policy. With inflation under control, if there are no black swans, we will have further reductions of interest rates. There may be more than one cut this year.’

Even with a bumpy last kilometre, the disinflationary process was evident, he said. ‘[I]t’s important to see the forest through the trees. The forest is a very clear disinflationary trend’, he said.

After a period of stagnation, the euro area's economic growth was becoming more visible, he said.

‘A restrictive monetary policy is still needed, but not as restrictive as it was before this decision’, Šimkus noted.

The evolution of the labour market, profit margins and geopolitical tensions posed risks to inflation and, if they materialised, could slow the easing process, he said.

‘We have had wage negotiations and an acceleration in wage growth, but the slowdown in wage growth is slowly creeping in. But there are a lot of buts’, he said. ‘We are anticipating more, but it may take time, it may be slower. It has a huge share in services inflation.’