ECB/Panetta: moment of reversal of monetary policy stance is fast approaching –

The moment to reverse the stance in Europe's monetary policy is approaching quickly, said the member of the board of the European Central Bank (ECB), Fabio Panetta, during his participation in an event held by the association of Italian financial market operators, in the city of Genoa.

In Panetta's assessment, current macroeconomic conditions suggest that the disinflation process is at an advanced stage and progress towards the 2.0% target “continues to be rapid”.

During the speech, the ECB leader also pointed out that the main upward risks for inflation previously predicted have proven to be “unfounded”. “There was no upward de-anchoring of inflation expectations; in fact, downside risks are emerging,” he said.

He highlighted that the concern about a “persistently high” core inflation has not materialized and that there has also been no upward de-anchoring of inflation expectations. “Fears that inflation would stop falling after the initial rapid decline now appear unjustified: inflation is falling at the same rate or even faster than it rose,” he said.

For the ECB leader, the transmission of the effects of monetary tightening on activity has proven to be stronger than previous experiences and the initial forecasts of the European monetary authority. “Furthermore, interest rate increases and reduced liquidity supply will continue to weigh on the economy throughout the first half of 2024,” he added.