By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gediminas Šimkus on Thursday cautioned against drawing early conclusions about whether the ECB would need to act at its April meeting in response to the Iran shock.

Šimkus, who heads the Bank of Lithuania, told media that “caution is needed” for now.

“Whether action is already required in April, it’s definitely too early to make such generalizations at this point,” he said. “We can only do guesswork on how the situation in Iran will evolve, what the final consequences will be.”

Given the uncertainty, he added, “whatever I say now may look very different from the information we get at the end of April.”

On inflation, Šimkus said rising consumer expectations did not yet warrant overreaction. “We see rising consumer inflation expectations, but I wouldn’t overplay that because similar processes happened a few years ago,” he said.

Credibility would be key, he said, arguing that the ECB had already shown it could respond forcefully when needed. “What’s very important is trust in institutions, credibility,” he said.

“I think the ECB has shown very well that it’s an institution that can deal with an inflation shock with decisive action,” he said. “We have a much smaller shock than we had in 2022.”

“There is no reason to doubt that the necessary measures will be taken to bring inflation back to an equilibrium level, to 2% in the medium term,” he said.