ECB to continue cutting rates gradually, says Panetta

Fabio Panetta, a governing council member of the European Central Bank, stated that the ECB can continue to gradually reduce interest rates without jeopardizing the current decline in inflation.

The ECB reduced rates from their record highs for the first time in June but has not made any explicit commitment about future cuts.

"The reduction of official rates can proceed gradually, accompanying the return of inflation towards the objective, if macroeconomic trends remain in line with the ECB's expectations," Panetta said in a speech to bankers in Rome.

Panetta, the governor of the Bank of Italy, is broadly seen as a monetary policy dove by market analysts. He downplayed concerns over persistently high service sector prices, noting it is normal for them to decline with a lag compared to goods prices. He also mentioned that wage growth can be expected to moderate.

Panetta stated that past interest rate hikes are still dampening demand, output, and inflation, and will continue to have this effect in the coming months.

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