Panetta (ECB): War stimulus program should not be withdrawn

The European Central Bank should not withdraw its economic support program for the time being, as the war in Ukraine increases uncertainty and the Bank still needs evidence that inflation will not fall below the target, the board member stressed. . Fabio Panetta.

As price pressures escalated, the ECB prepared the markets for further curtailment of the support program at its March 10 meeting, until the war in Ukraine overturned those plans.

While conservatives say rising inflation, mainly due to rising energy prices, guarantees a faster exit from bond markets, the more moderate members of the ECB, including Panetta, argue that there must be patience given the fear. for the uncertain financial cost of the war and related sanctions.

“It would not be wise to go any further until there is strong confirmation that both real and expected inflation will stabilize again at 2% in a world with tighter financing conditions,” Panetta said in a statement.

“In this environment, it would not be wise to commit to future policy measures in advance until the consequences of the current crisis become clearer,” he added.

“The risk of high inflation stabilizing seems to be limited at the moment,” he said.

At the heart of the debate is a divergent view of the duration of inflation.

Price increases are now more than double the ECB’s target, but policymakers disagree on the underlying price pressures, especially on the labor market situation.

Although Isabel Schnabel claimed last week that the eurozone was enjoying the strongest labor market in its history, Panetta reacted by saying the labor market “does not look too tight”.