ECB Governing Council member Fabio Panetta suggested today that even multiple rate cuts would leave ECB’s monetary policy in a tight stance. Panetta emphasized the importance of managing these adjustments carefully to avoid macroeconomic instability, stating, “When defining the path of policy rate cuts, it should be borne in mind that prompt and gradual action contains macroeconomic volatility better than a tardy and hasty approach.”
Panetta clarified that the anticipated rate cuts should not be seen as economic “stimulus” but rather as necessary adjustments to prevent the monetary policy from becoming “excessively tight” which might otherwise risk an inflation undershoot.
“Over the coming months, if the incoming data is consistent with the current projections, it will be appropriate to ease monetary conditions,” he said. “This will not stop the action to restore price stability.”
Reacting to today’s release of Eurozone inflation data, Panetta described the figures as “neither good nor bad.”
