A European Central Bank member explains the danger of reducing inflation below the target.

European Central Bank member and Governor of the Bank of Italy, Fabio Panetta, stated on Thursday that monetary policy in the euro area remains restrictive, meaning that interest rates are at high tightening levels, and added that interest rates should decrease.

Additionally, Panetta noted that the European Central Bank needs to pay attention to the weakening real economy, which is coinciding with a decrease in the inflation rate in the euro area. He pointed out that the central bank should avoid the risks of pushing inflation well below its target.

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

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