Transcript of Chat with ECB Governing Council Member Šimkus on 28 January 2026

28 January 2026

By David Barwick – VILNIUS (Econostream) – Following is the transcript of a brief chat on Wednesday, 28 January 2026 with European Central Bank Governing Council member Gediminas Šimkus, chairman of the Bank of Lithuania:

Q: Governor, some of your colleagues on the Governing Council are getting nervous about the appreciation of the euro, especially after US President Trump indicated satisfaction with the weakness of the dollar. Do you think this might be a reason for the ECB to cut rates?

A: It is impossible to 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. Our objective is 2% inflation over the medium term, symmetrically. But it’s also important to remember that the exchange rate is an expression of many things happening at the same time in the world, so for me, every monetary policy decision requires an overall assessment. As part of this, we need to consider how it affects the economy and what the implications are for business and consumer confidence. And all this has to be seen in the larger 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.

Q: Given your inclination not so long ago to ease policy just a bit further, I would have thought you might be more willing to react in terms of policy to the euro’s appreciation.

A: Not really, our current monetary policy stance fits the current situation well. Last year, when I was willing to contemplate another cut, my thinking was that economic activity would perform worse than it actually has. Look at our last projections: in December we saw 2025 GDP growth at 1.4%. But our projections a year earlier, in December 2024, predicted only 1.1% growth in 2025. In other words, despite “Liberation Day” and other adverse developments throughout the year that we didn’t know about in December 2024, the economy last year managed to perform significantly better than expected. 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. All this makes our near-term decisions rather clear.

Q: What if the dollar continues to depreciate?

A: Last year the exchange rate also went up and down. In September, the euro almost hit USD 1.19. So, the exchange rate fluctuates a lot and won’t necessarily continue to appreciate. It’s a very sensitive variable that reacts to all sort of information, and I’m not making any predictions about where it will go. But it would be a mistake to think that it can’t depreciate again. So, to say that we need to adjust monetary policy because the euro is at USD 1.19 is an oversimplification.

Q: Is there any lesson to be drawn from the moves we’re seeing?

A: We need to be agile, and it’s very important that we stick to our meeting-by-meeting, data-driven approach to setting monetary policy. 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. We don’t know what will happen. Just a week ago, we were facing the threat of new tariffs, and now these are apparently off the table. At least, for now.