Finance
ECB should ease monetary policy if disinflationary trends intensify, Panetta says
Published by Global Banking & Finance Review®
Posted on July 11, 2025
2 min readLast updated: January 23, 2026
Global Banking & Finance Review®
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Published by Global Banking & Finance Review®
Posted on July 11, 2025
2 min readLast updated: January 23, 2026
ECB's Panetta suggests easing monetary policy further if disinflation trends continue, amid uncertain euro zone inflation outlook.
MILAN (Reuters) -The European Central Bank should continue to loosen its monetary policy if threats to economic growth from international trade tensions and geopolitical instability strengthen the current disinflationary trends, a policymaker said on Friday.
ECB governing council member Fabio Panetta told an annual meeting of Italy's banking association that the current outlook, which projects euro zone inflation at 1.4% in early 2026 with a return to 2% the following year, was highly uncertain.
"The key issue now is whether the current level of interest rates is adequate to keep inflation close to target, avoiding persistent deviations in either direction," he said.
As inflation has diminished, the ECB has cut interest rates eight times in its current easing cycle, bringing the key deposit rate to 2%.
"If downward risks to growth were to strengthen disinflationary trends, it will be appropriate to continue with the policy easing," Panetta said.
He added that the experience of the past decade, which has seen an extended phase of low inflation followed by violent inflationary shocks, has shown it is important to react decisively when the inflation rate deviates from the ECB's target either upwards or downwards.
"In coming months, the monetary policy approach must remain flexible and pragmatic," Panetta said.
"It will be vital to continue to assess (from one ECB meeting to the next) the outlook and risks for price stability," he added.
(Reporting by Valentina Za, editing by Gavin Jones)
Fabio Panetta suggests that the ECB should continue to ease its monetary policy if disinflationary trends intensify, especially in light of risks to economic growth.
The current outlook projects euro zone inflation at 1.4% in early 2026, with a return to the 2% target expected thereafter.
The ECB has cut interest rates eight times in its current easing cycle, bringing the key deposit rate down to 2%.
Panetta emphasizes the need for a flexible and pragmatic monetary policy approach, urging continuous assessment of the outlook and risks for price stability.
Panetta notes that the past decade's experience of low inflation followed by violent inflationary shocks highlights the importance of reacting decisively to changes in inflation trends.
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