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Downside risks to the economy could increase

Speech by the member of the ECB’s executive board, Fabio Panetta

  • Continued monetary stimulus is needed
  • Premature policy tightening could turn supply shock into protracted recession
  • The ECB should review the current spike in inflation until there is evidence that the upside risks to medium-term inflation materialize
  • The condition of forward guidance on rising inflation “is not about to be fulfilled”
  • The current peak of inflation results from a mixture of “purely temporary factors”

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A slight acknowledgment that economic conditions are facing stronger headwinds, but the share of inflation is consistent with the message policymakers have been holding for some time now that it is transient.

Panetta is also calling for continued bond buying so that it fits perfectly with the narrative that the ECB will switch to adding more APP purchases next year.


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