Panetta: 'Inflation is falling, consensus grows on rate cut in June'

At the Stresa summit, the G7 central bank governors expressed their "satisfaction with the world economy's resilience to the monetary tightening" of recent years and noted that "the outlook is on the upswing, not in an exceptional manner, but of recovery worldwide". This was stressed by Bankitalia Governor Fabio Panetta at a press conference at the end of the G7 Finance Summit in Stresa. Inflation "also has a common underlying trend, it is falling in all the main economic areas", albeit unevenly, with Europe ahead of the US in this case.

"My impression is that the conditions are in place for an adjustment of the monetary policy stance. Inflation,' he continued, 'is falling in all its components and risks are decreasing. It seems to me that a fairly general consensus has emerged on an eventual cut in rates, and this consensus has spread even to those who had more reservations about this view'. However, the BoI governor recalled that the ECB's mantra is that every decision is taken from meeting to meeting and on the basis of the available data.

Regarding the health of the banks, Panetta said that 'they are in a strong capital situation. We see a banking system in Italy, in Europe, and in other countries that is healthy, well capitalised, and this is a strong element for the economy'. The banks' strength is due, he explained, to the regulatory efforts implemented after the financial crisis.

Panetta pointed out that the payments system was "a niche topic" in the G7 ministries of a few years ago, but "no longer today because of their geopolitical relevance". The goal, he explained, "is a payments system that works well, reliably and at low cost", which is essential for emerging countries, "today on the margins of the system". The geopolitical importance of having an efficient payment infrastructure in the West, both in Europe and the US, Panetta added, was seen with the imposition of sanctions on Russia. It was 'the most effective weapon', he added.

Panetta also addressed the issue of using the extra profits from Russian assets. The pros and cons of these measures have to be 'weighed up,' he said, because 'there may be repercussions on the functioning of the international monetary system and there may be a weakening of an important weapon of pressure for law enforcement in the future, so this possibility has to be watched carefully. And it is a weapon that must be used wisely and prudently'. Panetta pointed out that 'the central banks have no misgivings' but have pointed out this element and the need to 'have a more solid legal basis, because it would be paradoxical if we reacted to a violation of international law by taking a measure without a legal basis'.