ECB Executive Board member Fabio Panetta said in a speech that “the end of the pandemic emergency is in sight and an incipient recovery is on the horizon”. As such, “it might be tempting to conclude that there is less need for monetary policy support.” But he warned that “this temptation must be resisted”. And 2021 is “still a pandemic year”, as the economic consequences will not end soon.
“We will still face two prominent gaps that we need to close: the output gap and the inflation gap,” he added. “At present, the risks of providing too little policy support still far outweigh the risks of providing too much.”
Monetary policy is now in the “third phase” that ECB needs to “preserve accommodative financing conditions to support the recovery and the convergence of inflation to our aim”.
“The steepening in the nominal GDP-weighted yield curve we have been seeing is unwelcome and must be resisted,” he warned.
