ECB's Panetta says EZ inflation is currently around 3% and expected to remain above that level until early 2027

Risks linked to higher energy prices, tighter financial conditions and persistent geopolitical uncertainty appear to be only partially incorporated into market evaluations. Several indicators suggest the rise in equity markets seen after the Iran conflict is due to an underestimation of risks. ECB's goal is to keep inflation expectations firmly anchored, limiting indirect and second-round effects of shocks. Prolonged hostilities in the Middle East, coupled with renewed pressure on energy markets, could lead Italian banks to be more cautious and tighten credit standards.