Piero Cipollone, Executive Board member of the European Central Bank (ECB), emphasized that the ECB does not need to implement further measures to curb demand to stabilize inflation. Cipollone’s remarks suggest that interest rates do not require additional increases.
In his inaugural public comments on monetary policy since assuming office in November, the Italian official indicated that the struggling economy of the eurozone could witness a rebound without a corresponding increase in prices.
In Brussels on Monday, Cipollone emphasized that with demand remaining subdued and inflation expectations firmly anchored, there is no urgent need for monetary policy to introduce additional slack to control inflation. He noted that the normalization of supply shocks provides an opportunity for demand to recover without worsening inflation.
Most policymakers are indicating the potential for rate cuts in April or June as inflation shows signs of cooling. The timing is contingent on achieving the 2% inflation target, a milestone the ECB anticipates will not be reached until the following year.
Italian central bank governor Fabio Panetta suggested over the weekend that the time for policy easing is swiftly approaching, citing the rapid progress towards the inflation target. However, more hawkish members of the Governing Council, including Isabel Schnabel, have advocated for patience and cautioned against premature rate cuts.
Key inflation drivers such as wages and profits are under intense scrutiny by officials. According to a recent ECB indicator unveiled last week, wage growth in the euro area remains elevated without reaching an inflection point.
Cipollone noted that the current decrease in energy prices presents a chance for potential wage catch-up, especially if profits revert to standard levels. However, the interaction of these elements will ultimately decide the sustainability of inflation alignment with our target. Hence, a data-driven strategy is crucial as we assess our upcoming monetary policy decisions.
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Author Faith Yakubu 
