Lithuanian c. banker expects ECB's interest rate hike to be last one

  • 2023-09-15
  • BNS/TBT Staff

VILNIUS – Gediminas Simkus, the Lithuanian central bank's governor, said on Friday that he expects the European Central Bank's 10th straight interest rate hike on Thursday to be the last one in the current cycle.

"Inflation (forecasts) this year and next year have been revised upwards, and combating inflation, defeating it, unfortunately, requires, hopefully, the last dose of medicine – a 25 basis point increase in interest rates," he told LRT Radio. 

The ECB on Thursday raised its key interest rates by 25 basis points for the tenth consecutive time, saying that "inflation continues to decline but is still expected to remain too high for too long". 

The Governing Council took the decision by a majority of votes, because inflationary processes are still strong, Simkus noted.

The Bank of Lithuania's governor said that while the interest rate hike might be painful for some people, it is an appropriate measure to rein in inflation.   

"Interest rate hikes are unpalatable, bitter, but they are a medicine to combat the main enemy – inflation," said Simkus. "Unfortunately, (annual) inflation in Lithuania topped 22 percent (in September 2022), and food inflation was even higher. 

"We are talking about loan holders, but they are part of society: about one-fifth of the population has mortgage loans," he said. "Inflation affects everyone and devalues people's incomes and savings."

Thursday's decision was based on the inflation outlook in light of the latest data, net inflation and the impact of ECB decisions on the economy, according to Simkus. 

"The message is for those who take out loans. Responsible lending is not an empty phrase; we have to responsibly assess our ability to repay loans when taking on financial obligations," he told the public broadcaster.