Fabio Panetta: Playing the long game - how should monetary policy adapt to the Great Reconfiguration?
Speech by Mr Fabio Panetta, Governor of the Bank of Italy, at the closing conference of the ESCB Research Network on "Challenges for Monetary Policy Transmission in a Changing World (ChaMP)", hosted by the Bank of Italy, Rome, 7 July 2026.
In the closing speech of the Bank of Italy's research network, Governor Fabio Panetta emphasized that the past four years have been exceptional, characterized by a mix of shocks and structural changes with little historical comparison. The initial perception of these extraordinary events as temporary disturbances has evolved into a defining aspect of the global economy.
Tensions in geopolitics, fragmentation in trade, and technological disruption are no longer fleeting issues but rather forces that continuously reshape the circumstances of households, businesses, and decision-makers. These forces create uncertainty that is not only high but persistent. For central banks, these elements present a common challenge as they are hard to categorize as pure supply or demand shocks.
They impact the supply side through energy costs, production expenses, trade flows, and essential inputs. However, they also influence demand through income, confidence, consumption, and investment. Crucially, they can alter the economic structure, including the transmission of monetary policy. This environment does not merely call for a policy adjustment; it demands a regular reassessment of how we project the inflation outlook, evaluate the policy stance, and modify the reaction function.
Written by urgent.news from BIS Central Bank Speeches's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
