ECB's Panetta: Policy has to tighten to ensure inflation does not become entrenched

European Central Bank (ECB) executive board member Fabio Panetta said on Monday that the monetary policy has to continue to tighten to ensure that inflation in the Eurozone does not become entrenched, as reported by Reuters.

Key takeaways

"The impact of the current shocks on the output gap is clearly unclear."

"It would be misguided to base an aggressive tightening on assumptions which cannot be conclusively substantiated."

"It may then be too late to fully reverse the consequences of possible errors."

"For as long as inflation expectations remain anchored, monetary policy should adjust but not overreact."

Market reaction

The Euro (EUR) is struggling to find demand following these comments and EURUSD was last seen losing 0.45% on the day at 1.0305.