The European Central Bank (ECB) may reduce interest rates further should inflation continue to decline and the economy remain stagnant, according to Governing Council member Gediminas Simkus. However, he abstained from forecasting the decision for December.
As projections indicate that Eurozone inflation will reach 2% next year, Simkus, the chief of Lithuania's central bank, stated to reporters in Vilnius, "The direction of monetary policy is clear." Nevertheless, he emphasized the importance of maintaining flexibility, as new ECB staff projections are expected in December.
"I cannot predict the outcome for December," he remarked.
Meanwhile, Martins Kazaks, President of the Bank of Latvia, also noted that ECB rates are likely to continue decreasing, as inflation is steadily approaching the 2% target.
"Declining inflation and a sluggish economy permit a further gradual reduction of interest rates," Kazaks mentioned in a blog.
In June, the ECB reduced interest rates for the first time since 2019, attributing this move to an improved inflation outlook.
Last week, the ECB decreased interest rates by 25 basis points, as anticipated, following a similar cut in September. The policy announcement and subsequent comments from ECB President Christine Lagarde indicated growing concerns about the lackluster economic performance within the euro area.
The central bank is largely expected to reduce rates again in December.
