ROME, May 29 (Reuters) – The European Central Bank will act in a “timely and measured manner” to prevent the current energy shock from turning into persistent inflation, governing council member Fabio Panetta said on Friday.
• Panetta, the governor of the Bank of Italy, was speaking at the Italian central bank’s annual assembly in Rome.
• He said the forward-looking inflation picture appears to call for a “recalibration” of monetary policy by the ECB.
• The bank is widely expected to raise rates at its next governing council meeting on June 10-11, with numerous policymakers signalling a need for action.
• Panetta said that at that June meeting it will be crucial to assess the extent of the pass-through from higher energy prices.
• Oil and gas prices are unlikely to normalise quickly even if the Iran war is rapidly resolved, the Bank of Italy chief warned.
• He said consumers’ inflation expectations are rising and firms have already started planning price increases.
• Nonetheless, he noted that medium term inflation expectations on financial markets remain firmly anchored to the ECB’s 2% target.
(Reporting by Valentina Za, editing by Gavin Jones)
