ECB Government Board member Fabio Panetta stated in a speech, “after the progress we now have already executed in adjusting our coverage stance, an aggressive tightening will not be advisable, for 2 essential causes.”
First, “present macroeconomic insurance policies must be designed to keep away from unnecessarily heightening the chance that the more and more probably contraction in coming months turns into a extreme and protracted one, which might scar the financial system… it additionally requires that financial coverage doesn’t ignore the dangers of overtightening,” he stated”.
Second, “even within the face of lasting penalties of provide shocks on potential output, the implications for the output hole, inflation dynamics and optimum coverage calibration can solely be derived over time. And this reinforces the case that, for so long as inflation expectations stay anchored, financial coverage ought to modify however not overreact”.
Full speech right here.
