A member of the European Central Bank highlights the dangers of reducing inflation below the target.

Fabio Panetta, a member of the European Central Bank and Governor of the Bank of Italy, stated on Thursday that monetary policy in the Eurozone remains restrictive, meaning that interest rates are elevated to tightening levels, adding that interest rates should decrease.

Additionally, Panetta noted that the European Central Bank needs to pay attention to the weakness of the real economy, which has coincided with a decline in the inflation rate in the Eurozone. He emphasized that the European Central Bank should avoid the risks of pushing inflation significantly below the target.

In this context, he added that without a sustainable recovery, there is a risk of pushing inflation below the target, which opens up a scenario that monetary policy would find difficult to address and should therefore be avoided.

Moreover, Panetta underscored the importance of continuing the cycle of interest rate cuts in the Eurozone to prevent inflation rates from slipping to dangerous levels.