Comments from ECB Governing Council members today reinforced expectations for a rate cut in June, while also highlighting growing concern over the deteriorating macro environment.
Lithuania’s Gediminas Šimkus acknowledged that geopolitical developments since the start of the year have been negative for the economy, adding that inflation is now under “downward pressure”. He noted that June projections “may be a little bit worse” and warned of the risk the central bank will undershoot its inflation target.
He also pointed to the risk of China re-routing goods to Europe in response to rising US trade barriers—a trend that could weigh on European industry and import prices.
Šimkus indicated that a June rate cut is needed but remained non-committal on the pace of further easing, saying it’s still unclear whether the next move after June would come in July or September.
Separately, Finland’s Olli Rehn struck a similar tone, citing pervasive uncertainty and reaffirming that the Governing Council will retain “full freedom of action” to meet its price stability mandate.
While Rehn noted that progress has been made in bringing inflation toward the 2% target, he cautioned that global trade tensions pose a meaningful downside risk to growth.
