Euro: ECB cautious as euro area outlook stays fragile – BNY

BNY’s Geoff Yu cites European Central Bank (ECB) Governing Council member Fabio Panetta, who describes a fragile Euro area outlook with upside inflation risks and downside growth risks. Panetta stresses that policy should not follow a preset path, frames the latest rate hike as recalibration after oil-driven inflation, and says recurring supply shocks may force further adaptation to meet the 2% target.

Panetta flags balanced risks for Euro

"ECB Governing Council member Fabio Panetta said in Rome that the euro area faces a fragile outlook, with upside risks to inflation still coexisting with downside risks to growth."

"He argued that recent peace talks between the U.S. and Iran could eventually ease energy prices but warned that monetary policy should not follow a preset path."

"Panetta said policymakers must keep a close watch on geopolitical developments, energy markets, supply chains, wages and inflation expectations."

"He framed the ECB’s latest rate increase as a recalibration after earlier oil-driven inflation pressures and suggested that recurring supply shocks may force future policy to adapt to meet the 2% medium-term inflation target."

"Germany’s manufacturing headwinds remain significant, but recent sector surveys have improved, lowering near-term downside risk for the euro area."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)