ECB’s Panetta: Should Return to Normal Communication, Provide Guidance

23 October 2024

ECB’s Panetta: Should Return to Normal Communication, Provide Guidance
Fabio Panetta, governor of the Banca d’Italia, with ECB President Christine Lagarde at the ECB's Governing Council meeting in Ljubljana, Slovenia on October 17, 2024. Photo by Adrian Petty/ECB.

By Marta Vilar – WASHINGTON (Econostream) – European Central Bank Governing Council member Fabio Panetta said on Wednesday that the ECB should change its approach to communications and embrace again the ‘normal way’ of communicating.

In a panel session at the IMF annual meetings in Washington, Panetta, who heads the Banca d’Italia, said that returning to ‘normal’ means ‘concentrating on our reaction function […] and provid[ing] guidance in line with our medium-term orientation based on the reaction function’.

The 2% inflation target would be reached well before what the ECB had projected previously, according to Panetta.

‘We were projecting in our last round of projections in September that we would get to 2% at the end of 2025, in the second half of 2025. That is going to happen much earlier’, he said.

Slowing inflation and low growth meant cutting rates further was necessary, he said.

‘How much?’, he asked rhetorically, ‘I will not venture here anything [about] the analysis of what we should do. I think we should continue. The direction is clear’.

Given the slowdown seen in inflation and the lagging state of economic activity, Panetta did not rule out cutting rates below the neutral rate. ‘It is too early to tell’, he said.