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.
1. Introduction
When we launched this research network in 2024, I described the previous four years as exceptional: a period marked by 'a combination of shocks and structural changes with few historical precedents. Looking back, that assessment seems almost cautious.
What first appeared as a sequence of extraordinary events has become a defining feature of the global economy. Geopolitical tensions, trade fragmentation and technological disruption are no longer merely temporary disturbances. They are forces that continuously reshape the environment in which households, firms and policymakers operate. They generate uncertainty that is not only high, but persistent.
For central banks, these forces pose a common challenge. They are difficult to classify as sources of pure supply or demand shocks. They affect the supply side through energy prices, production costs, trade flows and critical inputs. But they also influence demand through income, confidence, consumption and investment.
More importantly, they can alter structural relations in the economy, including the transmission of monetary policy itself.
This environment requires more than a recalibration of the policy stance. It calls for a periodic review of how we examine the inflation outlook, assess the stance and adjust the reaction function.