Bank of Italy Governor Fabio Panetta urged the European Central Bank (ECB) to consider further rate cuts, according to Euractiv.
Panetta said the current restrictive monetary policy risked hampering economic growth. He made his call at an event on the World Savings Day in Milan, sending a clear message to ECB President Christine Lagarde.
The ECB’s aggressive monetary tightening after the energy shock helped to quickly curb inflation. However, “monetary conditions remain restrictive, requiring further cuts,” Panetta said. He warned that without a sustained recovery “we risk pushing inflation well below our 2% target.”
The European economy remains weak, burdened by persistently high real interest rates and the withdrawal of past fiscal stimuli. The Italian economy is feeling the strain.
The ECB has so far cut rates three times by 25 basis points each, with the most recent cut announced on 17 October. Panetta consistently favoured rate cuts, having first raised the issue in his first speech as governor of the Bank of Italy in November 2023.
In September, Italy’s Deputy Prime Minister Antonio Tajani criticised the ECB’s decision to cut interest rates by 0.25%. He claimed that it was “too timid” and that “the ECB should do more.”
I believe the founding treaty should be revised because it limits the ECB’s role to controlling inflation, whereas it should also support growth and the real economy.
However, Lagarde declared that the ECB was “an independent institution, as stated clearly in the EU Treaty, and we do not respond to political pressures.”
