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With eye on exchange rate, Panetta says ECB ready to do more

FILE PHOTO: Fabio Panetta, director of international and European relations at the European Central Bank, attends the award ceremony for the Order of Merit of the Federal Republic of Germany at Bellevue Palace in Berlin, Germany, January 31, 2020. REUTERS/Annegret Hilse

FRANKFURT (Reuters) - The European Central Bank is committed to lifting the euro zone out of its recession and can provide still more stimulus if needed to counter any drag, including from the firming euro, ECB board member Fabio Panetta said on Monday.

With the bloc heading back into recession this quarter, the ECB approved more support last week but remarks from ECB chief Christine Lagarde that not all of its allotted firepower may be used raised some doubts about its commitment.

“We can guarantee our commitment to support the recovery,” Panetta said in a speech. “We stand ready to adjust all our instruments if downside risks to the outlook materialise, including those stemming from exchange rate dynamics.”

The euro is trading near 2-1/2-year highs against the dollar, a drag on exports and inflation and an issue highlighted by policymakers last week.

“There should be no doubt here: the ECB will not accept inflation settling at levels that are inconsistent with its aim,” said Panetta, who is considered one of the top supporters of the euro zone central bank’s ultra-easy policies.

Panetta also called on European leaders to use the European Union’s 750 billion euro fiscal support package wisely as it could raise growth 1.5% by 2026, with Italy, one of the bloc’s most indebted countries, standing to gain up to 3.5%.

Reporting by Balazs Koranyi; Editing by Francesco Canepa and Catherine Evans

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