The European Central Bank's interest rate cuts may be nearing an end, with officials calling for a "wait-and-see mode" to address uncertainties
The European Central Bank announced at its recent meeting that it will maintain interest rates unchanged, expecting the rate-cutting cycle to be nearing its end. Officials called for a wait-and-see approach to address economic uncertainty, emphasizing the flexibility of data dependence. Lithuania's central bank governor Simkus pointed out that the current economic situation is complex and that decision-making flexibility must be maintained, with the possibility of another rate cut to address inflation risks. The governor of the French central bank, Villeroy, also stated that future interest rate changes will depend on inflation data
According to the Zhitong Finance APP, the European Central Bank announced its eighth interest rate cut in this cycle last week and is expected to keep rates unchanged at the next meeting in July. According to informed sources, some policymakers even indicated that the rate cuts may have come to an end. ECB officials emphasized the flexibility of data dependence, showing that the ECB is shifting to a cautious wait-and-see stance, with a high probability of maintaining rates in the July meeting.
Gediminas Simkus, ECB Governing Council member and Governor of the Bank of Lithuania, called for a pause in interest rate adjustments, pointing out the "great uncertainty" in U.S. tariff policies. Simkus stated on Thursday, "After eight rate cuts, we have reached a neutral interest rate level—now it is important to maintain flexibility in decision-making and not lean in one direction. The current economic situation is very unclear—no one knows what decision the U.S. will make on July 9."
Simkus made his remarks a week after the ECB's latest rate cut (which lowered the deposit rate to 2%). According to informed sources, ECB President Christine Lagarde has indicated that the easing policy is nearing its end, and some policymakers believe this policy may have concluded.
Simkus stated, "I think it is necessary to pause and review our overall trajectory. I do not rule out the possibility of another rate cut this year, as I believe the risk of inflation falling below the medium-term target has increased."
His comments align with those of François Villeroy de Galhau, Governor of the Bank of France and ECB Governing Council member, who stated that he does not have a clear stance on future rate changes, and decisions will depend on relevant data. He said in an interview on Thursday, "The future direction of interest rates will depend on the evolution of inflation. I never pre-determine a fixed position—I believe in pragmatic and flexible monetary policy, and we will have to wait and see."
Similarly, Christodoulos Patsalides, Governor of the Central Bank of Cyprus, also emphasized that the Governing Council is "flexible and agile." Simkus added, "It is still too early to predict what will happen. In this uncertain environment, relying on data and assessing each step is crucial."
