European Central Bank’s Executive Board member Fabio Panetta said economic expansion has almost ground to halt and expected to face further “high costs” as policy makers battle record inflation.
In the starkest warning yet from the ECB of the damage being wrought by the war in Ukraine, Panetta told Italy’s La Stampa newspaper that the region’s economy is “de facto stagnating.”
“This makes the choices facing the ECB more complicated, as a monetary tightening aimed at containing inflation would end up hampering growth that is already weakening,” he said.
The International Monetary Fund slashing its 2022 growth forecast for the currency bloc to just 2.8%.
The ECB’s next rate meetings are on June 8-9 and July 20-21. While second-quarter GDP data aren’t officially published until July 29, indicators on how the economy is doing are available earlier.
Asked about rate hikes, Panetta said “it does not make much of a difference whether it is two or three months earlier or later.” Under current circumstances, however, “negative rates and net asset purchases may no longer be necessary.”