© Reuters. FILE PHOTO: A view of the European Central Bank (ECB) headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File Photo/File Photo
By Giselda Vagnoni and Valentina Za
GENOA, Italy (Reuters) – The second is “fast approaching” for the European Central Bank (ECB) to chop rates of interest, and well timed and gradual steps may assist to scale back ensuing volatility on monetary markets and within the financial system, a high policymaker mentioned on Saturday.
Addressing the Assiom Forex assembly in Genoa, ECB Governing Council member Fabio Panetta mentioned the following financial coverage transfer needed to replicate a state of affairs through which disinflation is ongoing and fee hikes are proving to have a stronger impact on the financial system than prior to now.
“The time for a reversal of the monetary policy stance is fast approaching,” mentioned Panetta, who turned Bank of Italy governor in November after a stint as an ECB govt board member.
“We need to consider the pros and cons of cutting interest rates quickly and gradually, as opposed to later and more aggressively, which could increase volatility in financial markets and economic activity,” he added.
The European Central Bank held rates of interest at a record-high 4% final month and reaffirmed its dedication to combating inflation even because the time to start out easing borrowing prices approaches.
The debate is now focussed on whether or not the ECB will begin to lower charges as early as April or choose to delay.
“Any speculation on the exact timing of monetary easing would be a sterile exercise and disrespectful to the ECB Governing Council as a collegiate body,” Panetta mentioned.
The ECB ended its fastest-ever cycle of fee hikes in September.
In current weeks, key policymakers have argued that extra proof that inflation is heading again to focus on is required earlier than any fee cuts, regardless of rising confidence that worth pressures are easing.
“What should be discussed now are the conditions to start monetary easing, while avoiding risks to price stability and unnecessary damage to the real economy,” Panetta mentioned.