ECB should maintain rhythm in rate cuts – Simkus

Gediminas Simkus, member of the European Central Bank (ECB) Governing Council emphasised the need for a steady pace of rate cuts as inflation comes under control.

Speaking in Vilnius on Thursday, Simkus highlighted the importance of “a rhythmic, consistent pace downward towards the neutral rate,” with future decisions driven by incoming data.

While inflation risks for 2025 appear balanced, Simkus warned of potential downside risks in 2026. The ECB, which has implemented four rate cuts this year, is deliberating on the speed and extent of further reductions.

Analysts expect the deposit rate to drop from 3 to 2 per cent through four quarter-point cuts, while investors anticipate a slightly lower endpoint of 1.75 per cent.

Simkus noted that a rate near 1.75 per cent would align with the lower end of the estimated neutral range of 1.7-2.5 per cent, a level that neither stimulates nor constrains the economy.

Elevated geopolitical uncertainty and Donald Trump’s return to the White House add to the complexity of the ECB’s decisions.

Attribution: Bloomberg

Subediting: M. S. Salama