The European Central Bank (ECB) must be careful not to cause “unnecessary damage” to the economy and financial stability through its interest rate policy, new Bank of Italy President Fabio Panetta said on Thursday.
ECB board member Panetta added that the round of monetary tightening has not yet exerted its full impact and will continue to reduce demand in the future.
In his first speech since becoming head of Italy’s central bank, Panetta warned that the euro zone economy will remain weak in the final three months of this year and that risks to the economy are tilted to the downside.
“We must avoid unnecessary damage to economic activity and risks to financial stability, which would ultimately harm price stability,” Panetta said.
The current level of interest rates is consistent with reducing inflation to the ECB’s 2% target, he said in Thursday’s speech.
The ECB raised interest rates to a record 4% this year to stop rising prices, but signaled it would maintain monetary policy for the coming quarters and markets began to position themselves for the first rate cut, with a move expected as early as April or June.
Source: Terra
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