(Bloomberg) -- The recent retreat in consumer-price growth and the weakening of economic activity call for further interest-rate cuts by the European Central Bank, according to Governing Council member Fabio Panetta.
“There’s a combination of low inflation and weak growth, and clearly this is conducive to further loosening of our monetary policy,” the Italian central-bank chief said on Wednesday during a discussion in Washington, where he’s attending the annual meetings of the International Monetary Fund.
Panetta added that the ECB is likely to reach its 2% inflation target “much earlier” than at the end of 2025 as envisaged in its September projections.
The ECB lowered interest rates for a third time this year last week. President Christine Lagarde’s view that downside risks to the inflation outlook may now prevail has prompted economists and traders to brace for a more aggressive removal of policy restriction.
At 3.25%, the ECB’s deposit rate continues to restrain the economy — even as when surveys point to slowing growth momentum and the labor market shows signs of weakening. At the same time, inflation fell below 2% in September for the first time in more than three years.
Panetta said the direction for rates is “clear” and that the ECB cannot exclude the necessity to lower borrowing costs below a neutral level, that neither stipulates nor restricts the economy.
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