ECB's Simkus Says Rates To Go Lower If Inflation Slows Further

The European Central Bank could cut interest rates further if inflation continues to slow and the economy remains sluggish, Governing Council member Gediminas Simkus said on Monday, but he refrained from predicting the December move.

Citing the projection that the Eurozone inflation will hit 2 percent next year, Simkus, who is the Lithuanian central bank chief, told reporters in Vilnius, “The direction [of monetary policy] is clear.”

That said, the policymaker stressed on the need to remain flexible as new ECB staff projections will be made available in December.

“I don’t know what will be the decision in December,” Simkus added.

Elsewhere, Bank of Latvia President Martins Kazaks also said ECB rates will continue to decrease as inflation is on a sustainable path of return to the 2 percent target.

“…falling inflation and a weak economy – allow for further gradual lowering of interest rates,” Kazaks said in a blog.

In June, the ECB cut interest rates for the first time since 2019, citing an improvement in the inflation outlook.

The ECB cut interest rates by 25 basis points last week, as expected, following a similar reduction in September. The policy statement as well as the post-decision comments from ECB President Christine Lagarde suggested that the bank is increasingly concerned over the weak economic performance in the euro area.

The central bank is widely expected to lower rates again in December.

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