FRANKFURT (Reuters) – The European Central Bank should err on the side of providing too much stimulus rather than too little, given the grave risks facing the euro zone economy, ECB board member Fabio Panetta said on Tuesday.
“Faced with such a sizeable downward skew, there is a strong case for our reaction function to be asymmetric, as the risks of a policy overreaction are much smaller than the risks of policy being too slow or too shy to react and the worst-case scenarios materialising,” Panetta said in a speech.
Panetta also singled out the recent appreciation of the euro as an “undesirable” factor weighing on inflation.
“The sustained appreciation in the external value of the euro has brought about an undesirable tightening of financial conditions and has offset some of the monetary accommodation provided by our measures,” he added.
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