(Finance) – “The examination of macroeconomic conditions indicates that disinflation is at an advanced stage and that the path towards the 2 percent objective continues quickly. rapidly approaching The moment of a turnaround in the direction of monetary policy”. He stated this Fabio PanettaGovernor of the Bank of Italy, during the annual congress of Assiom Forex, the association of financial market operators, underway in Genoa.
“The forecasting exercise that the ECB will carry out in March will offer useful elements for evaluating the next monetary policy actions – he added – It will be appropriate to evaluate not only the first move, but also the different options for the entire monetary normalization path. The benefits and contraindications of one must be weighed timely and gradual rate cuts versus late and aggressive easingwhich could increase volatility in financial markets and economic activity.”
As for the transmission of monetary policy, Panetta underlined that “the effects of the restriction are proving stronger compared both to historical experience and to what the ECB estimated in the past. Furthermore, rate hikes and the reduction in liquidity supply will continue to weigh on the economy at least through 2024.
According to the Governor of the Bank of Italy, “it is crucial that the next decisions are consistent with the macroeconomic framework we face” and “in the current context of uncertainty any conjecture on when to start monetary easing is a sterile exercise , as well as disrespectful of the collegiality of the ECB Council.What we now need to discuss instead is what conditions are necessary to initiate monetary easing avoiding risks to price stability and unnecessary damage to the real economy”.
Panetta listed three necessary conditions. The first is that “the disinflation process is at an advanced stage”, the second is that “the decline in inflation is continuing” and the third is that “the achievement of the inflation target is not compromised by a possible cut in taxi”.