Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Eric Albert

2 June 2023

The ECB’s objective is to keep inflation at 2%. It is currently at 6.1%. Should people be worried?

There is no doubt that 6.1% is too high, but people should not be worried. We will bring inflation back to 2%. In less than a year, we have raised interest rates decisively, from -0.5% to 3.25%, and inflation is falling, as confirmed by yesterday’s data.

As a result of our rate hikes, banks are increasing lending rates and reducing the loan supply. This is being passed on to the real economy: firms are taking this into account when they plan their future investments, as are households when they take out home loans. But monetary policy typically exerts its impact over extended periods. It takes several quarters before its effects are fully felt by the real economy and then transmitted to inflation.

But how long will it take before inflation returns to a reasonable level, like…