MNI BRIEF: Panetta Says ECB On Course For Inflation Target
While data could provide surprises, “the overall course of monetary policy will not change” so long as inflation continues to head toward target, Bank of Italy Governor Fabio Panetta said on Wednesday, noting that monetary policy remains restrictive and that its impact on inflation may be stronger in 2024 than 2023.
Persistent higher services prices are “only apparent” as inflation in this sector started to rose and peaked later, Panetta said in a speech in Helsinki. Concerns that wages could reignite inflation are mitigated by the fact that firms have not fully passed on the fall in energy prices, by falling intermediate costs and the prospect of faster productivity growth. (See MNI SOURCES: September Rate Cut In Sight For ECB)
The effects of rate cuts are “likely to be mitigated by the ongoing contraction of the Eurosystem’s balance sheet,” he said.