ECB’s Panetta: Macroeconomic Indicators and Projections Suggest We're Not Done

26 March 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Fabio Panetta said on Wednesday that there was still more to be done by the ECB in its easing cycle given what macroeconomic indicators and projections were showing.

In an article written in the Financial Times, Panetta, who heads the Banca d’Italia, said that r* was only useful in setting policy when interest rates were far from r*'s estimated level.

‘If interest rates fall within the r*’s grey zone, inflation is declining towards target, and growth remains weak, chances are that policy is still restrictive’, he said.

The ECB was now facing a ‘delicate balancing act’, he said.

On the one hand, weak economic growth was disinflationary and extended stagnation could result in inflation undershooting the 2% target, according to Panetta.

On the other hand, the recent surge in energy prices or Germany’s loosening of the debt brake and higher European defence spending created uncertainty, he said.

‘In this landscape, fixating on whether the stance should be qualified as “restrictive” risks keeping attention on the R-star galaxy when our gaze should focus on the inflation horizon — and on whether the stance is appropriate to reach the 2% target’, he said.

‘Overall, macroeconomic indicators and projections suggest there is still work to do’, he argued.

However, he acknowledged that high uncertainty implied that giving precise guidance about the pace and timing of future movements was still ‘extraordinarily complex’.

‘The ECB must remain pragmatic and data-driven’, he added.