By Laura Contemori – ROME (Econostream) – European Central Bank Governing Council member Fabio Panetta on Friday said the ECB’s monetary policy stance should be reevaluated, as the energy shock is already pushing up consumer prices.

“[T]he forward-looking picture seems to call for a recalibration of the monetary policy stance to counter the risk of persistent inflationary tensions,” he said in a speech at Banca d’Italia, which he heads.

“It will be crucial to assess the extent to which higher energy prices pass through to other prices and how much they affect consumption, investment and overall economic activity,” he said with an eye toward the Governing Council’s upcoming monetary policy meeting.

“The calibration of the monetary response will depend on this assessment,” he added.

Monetary policy cannot prevent higher energy prices, but it must prevent them from spreading across the economy and triggering persistent inflation, he said. “A wage-price spiral must be averted, as once it has begun it would be harmful and costly to eliminate,” he said.

“Not being tied to a predetermined path remains essential,” he said.

Turning to the Italian economy, Panetta stressed the need to drastically increase productivity to avoid remaining locked into “structurally modest growth rates.”

“Demographic trends make this challenge extremely urgent,” he said, noting that the working-age population is declining sharply, a trend that will prevent the country from “relying permanently on employment growth to support economic development.”

The Persian Gulf conflict has undermined an already weak outlook, and economic activity will most likely remain fragile in the coming months, even stagnating or contracting in a worst-case scenario, he said.

In the event of a prolonged conflict and further damage to Gulf energy infrastructure, overall growth in 2026–2027 could be reduced by one percentage point, while inflation “could peak at more than 6% and, if left unchecked, remain above target for some time,” he said.