Central Banks
ECB Needs ‘Convincing Evidence’ to Be Restrictive, Panetta Says
- Excessive tightening may leave hard-to-heal scars, he says
- Panetta is among more dovish ECB Governing Council members
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The European Central Bank shouldn’t rule out raising interest rates to a level that brakes the economy but it should first do careful analysis to determine if that’s warranted, Executive Board member Fabio Panetta said.
“Being prudent does not rule out the possibility of us having to move from withdrawing accommodation to restricting demand,” Panetta said in a speech in Florence. “But in the absence of clear second-round effects, we would need convincing evidence that the current shocks are likely to keep having a more adverse effect on supply than on demand.”