ECB Insight: Rehn Joins Šimkus in Coming Out Clearly for June Cut; Schnabel Still to Speak

9 May 2025

By David Barwick – FRANKFURT (Econostream) – There was never much question about where European Central Bank Governing Council member Olli Rehn came down on the question of whether or not to cut interest rates again in June, but the Bank of Finland governor laid any lingering doubts to rest on Friday.

During a Q&A at the European Day Conference in Helsinki, Rehn made the case that if the ECB’s June projections confirmed disinflation and weaker growth, ‘then in my view in order to achieve our 2% symmetric inflation target over the medium term, the right reaction in monetary policy is to cut rates.’

Meaning another 25bp on June 5, though in view of how consistently Rehn has been beating the drums for policy easing since well into last year, this is no surprise and we can imagine that he would be among the minority interested in making a larger move an agenda item at the meeting.

As for Šimkus, the Bank of Lithuania governor had been making yet less of a secret about his support for a June cut even before Friday’s interview with Bloomberg TV. The difference today was the openness he expressed about cutting rates beyond next month.

He could not ‘reject the chances that there might be another cut after June’, be it in July, September or even December, he said.

Like Rehn, Šimkus has also stood out as a staunch supporter of ECB policy easing throughout the cycle. We would thus be hard-pressed to see the contribution by either of them today as anything more than gilding the lily – a June cut was already likely early this morning and isn’t much more so this evening.

Given that, the potentially much more interesting intervention to come is that of Executive Board member Isabel Schnabel later today. Or more precisely, early tomorrow, as her participation in a panel discussion at Stanford University won’t even start until 01:45 CET on Saturday.

To be clear, we naturally don’t know what to expect from Schnabel, who in recent weeks has diligently avoided monetary policy, even in the context of appearances at which the topic would have been completely appropriate and indeed welcome.

Still, the conference at which she will shortly be speaking is specifically devoted to monetary policy, meaning it may make less sense for her to skirt delicate issues. Indeed, at such a prestigious academic venue she should feel at home tackling them head on, and the timing of the occasion, with markets everywhere already closed for the weekend, could encourage her to be more forthcoming than she was recently in London, Paris or Cernobbio, Italy.

If she does finally speak her mind, then we see no reason to expect her to sound anything like her Governing Council colleagues Rehn and Šimkus. As it happens, we reranked both of the latter on the Econostream hawk-dove scale only on Monday, giving them scores we judge better reflect their dovish rhetoric.

In marked contrast to them, Schnabel ranks among the most hawkish policymakers, with only Belgium’s Pierre Wunsch and of course Austria’s Robert Holzmann even more so.

Still, the impetus for a June cut is such that, barring any major new information, railing against another 25bp would probably amount to tilting at windmills. For that to make sense, new information would be necessary, but with another four weeks until the June 5 decision and another 10 days or so until the cutoff date for the projection exercise, even an Executive Board member should not yet know what the updated forecasts will look like.

That makes Schnabel unlikely to have the new information on the basis of which she would be well advised to come out too strongly against a June cut, even if such a move may not sit all that well with her. And with other hawks who have spoken to Econostream lately not necessarily mortally opposed to a June cut, we see the day ending much as it began.