The Italian ECB executive does not rule out a technical recession
June 2 () –
The current cycle of interest rate hikes by the European Central Bank (ECB) has not yet ended, although it is not far from the end, as indicated by the Italian representative on the institution’s board of directors, Fabio Panetta, for whom it cannot be ruled out a technical recession in the eurozone as a result of the delayed impact of monetary tightening.
“My intuition suggests that we have not reached the end of our rate hike cycle, although we are not far from it,” Panetta said in an interview with the French newspaper ‘Le Monde’.
In this sense, the Italian considers that this is not the time to rush in the increases and anticipates that the debate will soon go from questioning how much the rates will rise to asking “how long?”
On the other hand, Panetta acknowledges that an inflation rate of 6.1% is too high and affirms that the ECB will return it to 2%, noting that currently the main threat to price stability stems from the strength of the labor market and companies’ profitability strategies.
It also warns that, although the European economy has not sunk into the deep recession that some had predicted, the monetary tightening implemented by the ECB will be felt in the coming months.
“We cannot rule out the possibility that domestic demand will continue to be weak and that this will translate into prolonged weakness in economic activity or even a technical recession,” he points out.
In any case, for the ECB executive, the European growth model of the last 20-30 years, based on cheap energy and relocation, “is running out.” “We need to review our growth model, adapting it to the new geopolitical landscape,” he concludes.
