© . The headquarters of the European Central Bank (ECB) is seen during sunset in Frankfurt, Germany, Jan. 5, 2022. REUTERS/Kai Pfaffenbach
FRANKFURT () – The European Central Bank should hold off on removing more stimulus for now as the war in Ukraine creates uncertainty and the bank still needs evidence that inflation will not fall below target, ECB board member said Fabio Panetta Monday. As price pressures mounted, the ECB prepared markets for further stimulative measures at its March 10 meeting, but the war in Ukraine would shake those plans. While conservatives argue that rapid inflation, driven by rising energy prices, still warrants an earlier termination of bond purchases, policy doves, including Panetta, are advocating patience given the uncertain economic costs of the war and associated sanctions. “It would be imprudent to move forward until we have strong confirmation that both actual and projected inflation will be sustainably re-anchored at 2% in a world of tighter financing conditions,” Panetta said in a speech. “In this environment, it would be unwise to pre-commit about future policy steps until the effects of the current crisis become more apparent,” he added. “The danger of high inflation becoming entrenched appears to be limited at the moment.” At the heart of the debate is divergent views on the sustainability of inflation. Price growth is now more than double the ECB’s target, but policymakers disagree on underlying price pressures, especially labor market conditions. While board member Isabel Schnabel argued last week that the bloc was enjoying the strongest labor market in its history, Panetta pushed back, saying the labor market “doesn’t look too tight”. “If we respond to a false signal and respond to a rise in inflation that may not last, we could choke the recovery,” Panetta said. “We should strive to guide recovery with a light touch and take moderate and careful steps.” Panetta added that the ECB was ready to take all necessary measures to boost confidence and stabilize financial markets. Disclaimer: Fusion Media would like to remind you that the data on this website is not necessarily real-time or accurate. All CFDs (Stocks, Indices, Futures) and Forex prices are not provided by exchanges but rather by market makers, and therefore prices may not be accurate and may differ from the actual market price meaning prices are indicative and not suitable for trading purposes . Therefore, Fusion Media does not bear any responsibility for any trading losses that you may incur as a result of using this data. Fusion Media or anyone associated with Fusion Media accepts no liability for any loss or damage resulting from reliance on any information, including data, quotes, charts and buy/sell signals on this website. Be fully informed about the risks and costs associated with trading the financial markets, it is one of the riskiest forms of investment possible.