• The ECB shouldn’t raise interest rates in April
• We can’t rule out a rate hike this year

ECB policymaker, Gediminas Simkus, reiterated the cautious stance regarding the ECB’s monetary policy, emphasising that while a rate hike in April is unlikely, the door remains open for policy tightening later this year.

The Lithuanian central bank governor indicated that there is currently no immediate pressure to adjust the benchmark rates during the upcoming April meeting. This view aligns with the broader consensus within the Governing Council, which has maintained a “data-dependent” and “meeting-by-meeting” approach.

Current policy rates, including the deposit facility rate at 2.00%, are viewed by many as appropriate given that core inflation has recently hovered near the bank’s 2% target, despite an uptick in headline inflation due to the energy price spike caused by the US-Iran war.

Simkus added that the ECB cannot rule out a rate hike before year-end though. While the eurozone has shown unexpected resilience with a steady growth rate and low unemployment, structural factors such as rising fiscal spending on defense and potential supply chain disruptions continue to pose upside risks to inflation.