ECB Executive Board member Fabio Panetta said in a speech “as policy rates move more firmly into restrictive territory and the energy shock abates, the risks to the inflation outlook have become more balanced.”
“The outlook for the economy and inflation has become increasingly uncertain, both globally and in the euro area.”
In this environment, we no longer need to overweight upside risks to avoid worst-case scenarios. We now need to take into account the risk of overtightening alongside the risk of doing too little.” he said.
A “data-dependent calibration of monetary policy” offers the best way forward while “smoothing our policy moves we ensure that their cost to the economy is minimal.”
“This doesn’t mean we will not be resolute in the fight against inflation. It means being resolute in the right direction. What we do not want is “to drive like crazy at night with our headlights turned off” – as Italian singer Lucio Battisti once put it.”
