HomeLive CommentsECB Panetta: Monetary policy should remain patient

ECB Panetta: Monetary policy should remain patient

ECB Executive Board member Fabio Panetta said, “the data suggest the current picture is dominated by a bout of ‘bad’ inflation generated outside the euro area, whereas we are far from seeing abnormally large domestic demand.” “Monetary policy should remain patient. A premature tightening would restrain spending before demand has returned to trend,” he added.

“We should not exacerbate the risk of supply shocks morphing into a demand shock and threatening the recovery by prematurely tightening monetary policy – or by passively tolerating an undesirable tightening in financing conditions,” Panetta warned.

Panetta also urged to continue with asset purchases. “First, the surge in the number of (COVID-19) infections and the renewed introduction of pandemic-related restrictions in some euro area countries mean that the pandemic is not over yet,” he said. “Second, an inappropriate, sharp reduction of purchases would be tantamount to a tightening of the policy stance.”

Separately, Governing Council member Robert Holzmann said, “the statements until now including of my colleagues on the Governing Council all suggest that net PEPP purchases will probably expire in March but that PEPP as such will not be done away with but perhaps be put in a waiting room.”

This will be in order to “save the advantages of flexibility in case they become necessary in the event of economic shocks, which are definitely possible, but we do not expect,” Holzmann said.

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