Exclusive: ECB’s Šimkus: “To Say We Need to Adjust Policy Because the Euro Is at $1.19 Is an Oversimplification”

28 January 2026

By David Barwick – VILNIUS (Econostream) – European Central Bank Governing Council member Gediminas Šimkus on Wednesday rejected calls to react too quickly to the strengthening of the euro versus the dollar.

In a brief chat in Vilnius (transcript here), Šimkus, who heads the Bank of Lithuania, said that one could not simply “pick out just one element of a very complex overall picture and draw a strong conclusion about what should happen in terms of monetary policy.”

Rather, it was necessary to consider all elements of the situation, he said, including the overarching geopolitical context.

“In the end, the exchange rate might turn out to be one reason to take a certain decision, but based on what we know now, I cannot conclude that we are already able to say that a future monetary policy move will need to be in any particular direction,” he said.

The exchange rate tended to fluctuate and the euro last year reached a level not far below its current one, he observed.

“[I]t would be a mistake to think that it can’t depreciate again,” he said. “So, to say that we need to adjust monetary policy because the euro is at USD 1.19 is an oversimplification.”

Šimkus brushed aside the suggestion that he might welcome the exchange rate as a reason to argue for further monetary easing, as he had supported doing at one point in the latter part of last year.

The ECB’s current monetary policy “fits the current situation well,” he said. “Last year, when I was willing to contemplate another cut, my thinking was that economic activity would perform worse than it actually has.”

A comparison of the 2025 growth forecast from December 2024 with the corresponding projection from last month indicated that even as adverse risks materialized, the economy did better than expected, he noted.

“And I would also say that we’ve done a great job on inflation, with headline and core measures fluctuating around our medium-term target,” he said. “All this makes our near-term decisions obvious.”

The ECB needed to remain agile and adhere to its meeting-by-meeting, data-driven approach, he urged.

“And we need to get used to this new environment of durably high uncertainty, in which geopolitics are a wildcard that can be the source of sudden adverse developments—via various channels—that impact the ECB’s decisions,” he said.