ECB’s Šimkus: Would Be Appropriate to Cut by 25BP in June

30 April 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gediminas Šimkus on Wednesday called for a 25bp rate cut in June.

In an interview with CNBC, Šimkus, who heads the Bank of Lithuania, said, ‘In my understanding, it would be an appropriate decision to proceed with the interest rate cut in June.’

Šimkus rejected a 50bp cut, saying that the only possible basis for such a move ‘should really be a very negative surprise’ and that he did not expect this.

‘I don’t find this outcome likely’, he said. ‘So, I’m the proponent of this consistent interest rate cut by 25bp.’

Whether the current 2.25% deposit facility rate was too high depended on where one thought the neutral rate was, but the neutral rate per se was not the proper basis for policymaking, he said.

What the ECB needed to focus on was setting the interest rate to be consistent with medium-term price stability, he said.

The revised macroeconomic projections in June would show slower growth than expected in March, he said.

Moreover, the general environment included ‘some additional disinflationary forces coming in’, he said, citing the price-dampening effect of the tariffs in the short term, the appreciation of the euro and cheaper oil and gas.

‘And not to mention that it’s not clear that much at the moment what will happen with the Chinese goods, whether and to what extent they will come into the European market’, he said.

It was thus not that the current rate level of 2.25% was too high, he said, but rather that further policy easing was necessary to ensure consistency with the objective.

Šimkus declined to be drawn out on the possible terminal rate, calling for ‘full optionality, full flexibility’ and defending the ECB’s meeting-by-meeting decisions based on available information.

However, cuts beyond June were ‘plausible’, he said. ‘Whether it will happen, we’ll see.’