ECB director urges caution when making economic forecasts

ECB director Fabio Panetta urges caution when making economic forecasts for the euro zone. "In general, it would not be prudent to rely on a quick recovery," said the member of the six-strong management team of the European Central Bank (ECB) in an interview with the Spanish newspaper "El Pais". It could be risky to expect progress that may not happen. "And even if we manage to get out of the pandemic soon, we will find that there is actually more damage to the economic fabric than is currently visible." According to Panetta, nothing is preventing a stronger recovery that would contain this damage. But the economy must receive the necessary amount of monetary and fiscal aid, said the central bank director of the newspaper. In his opinion, a prudent approach should tend to give too much support rather than too little. The central bank governors of the Netherlands and Belgium, Klaas Knot and Pierre Wunsch, had recently been much more optimistic about the economic outlook in interviews. In its most recent projection, the ECB had forecast economic growth in the euro area of ​​4.0 percent for 2021. The International Monetary Fund (IMF) expects an increase of 4.4 percent. According to Panetta, the ECB still has sufficient room for maneuver in terms of monetary policy. So far, only part of the framework of 1.85 trillion euros has been used that the large pandemic bond purchase program PEPP has. "But if we've spent that money and we're still missing out, we have to do more," he said. The central bank could not be satisfied with inflation of 1.2 percent in 2022 and 1.4 percent in 2023. These are the most recent forecasts made by ECB economists in March. The euro watchdogs are aiming for just under two percent inflation as the ideal value for the euro zone economy, but have been missing this target for years.