ECB’s Cipollone: 'Shouldn't Guard Excessively Against Possible Future Inflation Shocks’

9 January 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Executive Board member Piero Cipollone said on Thursday that the ECB shouldn’t be overly worried about countering future inflation shocks now but rather contribute toward realising the economy’s full potential.

In an interview with Italian daily Corriere della Sera, Cipollone said that the ECB ‘shouldn’t try to guard excessively against possible future inflation shocks.’

Instead, it ‘should seek to help the economy reach its potential, but without forcing it because that could drive up inflation expectations,’ he said.

For Cipollone, output growing below potential would lower the reaction capacity of the ECB in the event of shocks.

‘Having a higher “speed limit” for the economy, with real GDP growth consistent with its potential and wage growth consistent with productivity gains, helps to address future problems related to price dynamics with less stress,’ he said.

It was hard to predict with precision what impact Trump policies would have, as there was still not much detail about what he would do, according to Cipollone.

‘[I]t is precisely this uncertainty that could hold firms back, and it is certainly not good for investment and consumption,’ he said.

Asked about the weakness of the euro area economy, Cipollone reiterated that the ECB staff had revised down growth projections three times since June and said that ‘the current estimates only partially take into account the uncertainty surrounding future US trade policy, which is encouraging many players to sit on the fence.’