ECB could go below r* when setting policy, says Panetta
Bank of Italy governor says eurozone has to return to “normal way of doing monetary policy”
The European Central Bank (ECB) cannot rule out setting rates below the neutral level, the governor of the Bank of Italy has said.
Speaking at the International Monetary Fund (IMF) annual meeting in Washington, DC on October 23, Fabio Panetta said the eurozone’s policy rate was “still far from the neutral rate” or r*. However, he added that the bank “might not have to stop” at r* when setting rates.
The ECB has set its policy rate at 3.4%, whereas most economists measure r* in the eurozone at 0–1%
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