Gediminas Simkus, European Central Bank Governing Council member and Bank of Lithuania Governor, said the ECB could cut interest rates more than three times by the end of 2024, and did not rule out a rate cut at two consecutive meetings (in June and July). He also added that even if the Fed postpones monetary policy easing, the ECB should not change its plans to lower interest rates.
"I estimate a more than 50% probability that the ECB will cut rates more than three times this year. Three rate cuts is a conservative estimate," Simkus said.
Markets price just three cuts this year as expectations have retreated in recent weeks after unexpectedly high U.S. inflation data pushed Fed rate cut bets out until the autumn.
Simkus downplayed the impact of the Fed's decisions, saying the ECB would make independent decisions and the only question was how the divergent trajectory of interest rates would affect the real economy.
"It is obvious that the policy divergence is changing the terms of trade and economic development in both countries. This is reflected in forecasts and decisions on monetary policy," the policymaker said, adding that stronger than forecast data is unlikely to prevent the ECB from cutting rates at the June meeting, but an unexpected escalation of global political tensions may still affect the ECB's plans.