ECB's Panetta: Downside risks to the economy may be growing

Author: Justin Low | Category: Central Banks

Remarks by ECB executive board member, Fabio Panetta

  • Continued monetary stimulus is necessary
  • Premature tightening of policy could turn supply shock into prolonged recession
  • ECB should look through current inflation spike until there is evidence that upside risks to medium-term inflation are materialising
  • Forward guidance condition on rise of inflation "not close to being met"
  • Current inflation spike a result of a mixture of "purely temporary factors"
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Some light acknowledgment that economic conditions are facing stronger headwinds but the part of inflation is consistent with the messaging that policymakers have been maintaining for a while now i.e. that it is transitory.

Panetta is also calling for continued bond purchases so that just fits with the narrative that the ECB will transition into adding more APP purchases next year.

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