ECB’s Panetta: ‘Growing Uncertainty Requires a Prudent Approach to Rate Cuts’

31 March 2025

ECB’s Panetta: ‘Growing Uncertainty Requires a Prudent Approach to Rate Cuts’
Fabio Panetta, governor of the Banca d'Italia, at the European Central Bank International Women's Day 2025 event in Frankfurt on March 7, 2025. Photo by Adrian Petty/ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Fabio Panetta said on Monday that increasing uncertainty meant the ECB should take a cautious approach with respect to interest rate cuts.

In a speech at the ordinary meeting of shareholders of the Banca d’Italia, which he heads, Panetta said that the ECB’s decisions would have to take into account two opposing forces.

First, ‘the weakness of the European economy and geopolitical tensions are curbing consumption and investment, holding down inflation’, he said.

‘On the other hand, the growing uncertainty – due above all to the sometimes contradictory announcements on US trade policies – requires a prudent approach to policy rate cuts’, he continued.

The ECB could not yet say that the fight against inflation was over, he said.

‘It is crucial that we monitor any factors that could prevent inflation from returning to its 2% target’, he said.

Despite the number of rate cuts delivered by the ECB since June 2024, monetary tightening was still impacting credit due to the ‘usual lags’, he said.

 

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