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ECB should not aim for neutral rate, key policy dove says


© Reuters. FILE PHOTO: Senior Deputy Governor of the Bank of Italy, Fabio Panetta is seen standing in a corridor of the Bank of Italy ahead of his appointment to the European Central Bank’s executive committee, in Rome, Italy. September 26, 2019. REUTERS/Remo Casilli

FRANKFURT (Reuters) – The European Central Bank should curb stimulus gradually but policy normalisation should not be equated with getting interest rates back to the neutral setting, ECB board member Fabio Panetta said.

“We should avoid the risk of a ‘normalisation tantrum’,” Panetta said in a speech. “Normal does not mean neutral… normalisation process should not be assessed against unobservable reference points, such as the natural or neutral rate of interest.”

Instead, normalisation should be viewed from the perspective of inflation, aiming to cement price growth around the ECB’s 2% target, he added.

ECB should not aim to lift policy rate to neutral: Panetta

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