🧵 Inflation is still too high, but recent developments suggest that we can bring inflation down by continuing to adjust policy rates in a well-calibrated, non-mechanical way, Executive Board member Fabio Panetta tells @Handelsblatt.
Full interview https://www.ecb.europa.eu/press/inter/date/2023/html/ecb.in230124~f50d72e488.en.html
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Panetta: We strive to be predictable, but the current situation doesn't require us to commit to a specific rate path for too long or without reference to the data.
Our policy must depend on incoming information and take into account the lags with which it operates
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Panetta: Our reaction function consists of two elements:
1) the economic and inflation outlook, to prevent medium-term inflation from remaining above target
2) the risks surrounding this outlook, to avoid inflation expectations de-anchoring or a wage-price spiral emerging
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