Panetta: Central banks guard trust in uncertain times

Bank of Italy Governor Fabio Panetta reflected on the critical role of central banks in preserving trust amidst profound global uncertainties.

He noted that ongoing wars in Ukraine and the Middle East have eroded a sense of security, while the COVID-19 pandemic served as a stark reminder of historical health crises.

Panetta also addressed the widespread concern generated by artificial intelligence, which is rapidly transforming productive activities and raising questions about future employment.

Drawing parallels to ancient challenges and the industrial revolution, he stressed that uncertainty is an inherent part of history.

Panetta asserted that institutions, including central banks, are tasked with safeguarding public trust, especially during turbulent times.

For central banks, this responsibility translates into effective money management, which is fundamentally a collective pact of trust.

This involves ensuring secure payment systems and preserving the long-term value of money by controlling inflation.

Both aspects of central bank money management – ensuring secure payments and controlling inflation – are currently under pressure.

Ongoing conflicts risk fueling new price surges, with the ECB's Governing Council closely monitoring geopolitical developments to prevent a resurgence of the inflationary spiral seen between 2021 and 2023.

On the technological front, the rapid evolution of digital payments and investments presents a profound challenge.

These advancements, while progressive, also open the door to less transparent and stable forms of private money.

Such alternatives risk undermining the collective pact of trust that public money has guaranteed for centuries.

Guiding this transformation without losing essential foundations of public trust is a decisive challenge for central banks.

The upcoming Museum of Money in Rome, set to open next year, aims to help navigate these complexities.