(Finance) – “The return of inflation in the euro area to the goal of 2 percent in the medium term is almost complete. The rise in recent months – up to 2.5 percent in January – were expected and are due in part to basic effects related to the past evolution of energy prices. The underlying inflation remained at 2.7 percent, but its dynamic on the three months – more representative of recent trends – highlights an almost continuous drop since the beginning of last year and was equal to 2 percent in January ” . Fabio Panettaintervening at the 31st congress of financial market operators, organized in Turin by Assiom Forex.
“THE Prices of services continue to grow at a relatively supported rhythmequal to 3.9 percent – he added – this trend partially reflects the slow and gradual adjustment of the prices of past inflation services, and is therefore intended to attenuate itself as a result of the drop in total inflation “.
From the reversal of the route on the rates, five times have been reduced, bringing the reference of the ECB – the rate on deposits at the
Central Bank – at 2.75 per cent. “However the path of normalization of monetary policy is not concluded“, Panetta underlined.
According to the governor, “the reference rate remains superior to the estimates of the neutral ratethat is, the compatible level with the absence of inflationary pressures and with the potential growth of the economy. Consequently, monetary policy continues to exert a downward pressure on the production activity and the dynamics of consumer prices, an increasingly necessary effect in a context in which inflation is close to the objective and the internal demand remains weak. From here on, however, the concept of neutral rate will gradually lose relevance. The estimates of its value, in fact, are highly inaccurate, and provide only an approximate indication on the orientation of monetary policy, becoming less and less useful by way by official rates approach the estimated level of the neutral rate “.
In his analysis of the risks for inflation, he said that “currently the Main reduction risk for inflation is weakness of economic activity. Added to this are “the risks deriving from the increase in long -term yields. This phenomenon is due first to the increase in long -term dollar rates, which has spread to European financial markets, causing a sort of “import” from the United States of an unjustified monetary restriction from the economic situation of the area. In addition, the raises of rates in Yen is inducing Japanese investors to reduce their exposure to foreign securities – including European ones – in favor of domestic securities, exerting a pressure on long -term rates in euros “.
According to the governor, “a increase in US duties on European exports would not presumably have significant effects on inflation. The duties could generate rise to rise linked to a depreciation of the euro compared to the dollar and any retaliation measures by the EU. However, these effects would be compensated by a slowdown in the global economy and the hijacking towards the European markets of Chinese goods affected by high duties. According to our estimates, the net effect of the duties on inflation would therefore be contained, if not slightly negative “.
“THE more insidious risks for inflation come from energy marketswho are recording a strong volatility and an increase in prices, in particular gas, “he pointed out.
“Overall, the available indicators seem to suggest that the prevalent risk is still that of inflation of less than 2 percent in the medium term – said Panetta – this conclusion is consistent both with the inflation expectations implicit in financial contracts and with The evaluations of analysts. process of normalization of monetary policy must therefore be continuedaccompanying decisions with a communication oriented to the prospects of the real economy and inflation in the medium term. At this stage, excessive attention to the available data from time to time risks generating uncertainty and volatility in the markets, reducing the effectiveness of monetary policy “.