European Central Bank Governing Council member Fabio Panetta said on Tuesday that the ECB should focus on the sluggishness of the Eurozone economy and move interest rates into neutral, or even expansionary, territory. He added that it is not blasphemy that rates could go below neutral levels.
The official also noted that he thinks that restrictive monetary conditions are no longer necessary as inflation is close to target and domestic demand is stagnant.
In addition, Panetta expressed the view that the ECB can now return to a more traditional, genuinely forward-looking approach to monetary policy, in line with its medium-term orientation. "This will help firms and households to form their views on the future path of policy rates, thereby supporting demand and the recovery of the real economy," he added.