ECB’s Simkus: 25 bps rate cut needed in April

• 25 bps rate cut needed in April.
• US tariff announcement warrants more accomodative monetary policy.
• We need to move to a less restrictive policy stance.
• Worsening of trade tensions can be deflationary in the medium term.
• Policy is currently still more restrictive rather than neutral.
• Even with another cut, will still only be at the upper bound of neutral interval.
• US tariffs announcement much more disappointing that anticipated.
• Undershooting risk already up before April 2, must carefully monitor.
• In the medium term, undershooting or being at target is more probable than overshooting.
• In June, let’s see what has changed since April, then decide whether to cut again.
• I see no need to talk about 50 bps. That would be too much. We are not behind the curve.

This is not a surprise at all. The markets were already 100% sure of a cut.

This article was written by Giuseppe Dellamotta at www.forexlive.com.