MNI BRIEF: Mon Pol In Next Months “Far From Easy" -ECB Panetta

Charting the course of monetary policy in coming months will be far from easy, Bank of Italy Governor Fabio Panetta said Friday, noting that despitefurther deflationary risks, “previous cuts leave less room for reducing interest rates further”. (see MNI SOURCES: Risks Tilt To Downside As ECB Mulls Path Below 2% )

“However, the macroeconomic outlook remains weak and trade tensions could cause a deterioration,”Panetta said, admitting that it was hard to know how and when and for this reason the European Central Bank should maintain a “pragmatic and flexible approach” while closely monitoring liquidity conditions and signals from financial and credit markets.

Past concerns about the disinflation process and the "last mile" stickiness have proven unfounded, he said, adding the cumulative 175 bps of easing by the ECB will support the economy in the coming months. But a further appreciation of the euro and tighter financial conditions could magnify the recessionary impact of tariffs while increased Chinese imports could also push down production and inflation.