ECB’s Panetta: Increase in European inflation is temporary, no need to act
The European Central Bank (ECB) doesn’t need to intervene in order to tighten the monetary policy now, as inflation is driven by temporary factors, the central bank’s Executive Board member Fabio Panetta said over the weekend.
Key quotes
“In some countries, the increase in prices has generated angst.”
“The central bank is not intervening because if it did, it would create more damage than benefit. It’s like an illness, not all medicines are good for all illnesses.”
Current inflation is “bad,” but also temporary -- driven by supply chain snags and energy price increases, which “are bound to be overcome.”
“If inflation looked like becoming more permanent, he would be among the first in favor of ECB intervention.”
Market reaction
EUR/USD is pressuring lows near 1.1280, down 0.33% on the day, at the time of writing. Markets have shrugged off ECB President Christine Lagarde’s optimistic comments, citing that the “Eurozone is in a better shape facing a new covid wave.”
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
