ECB policymaker warns of rising fiscal pressure on central banks

Investing.com -- European Central Bank policymaker Fabio Panetta warned on Monday that central banks in Europe may face increasing pressure from governments dealing with higher pension costs and industrial support needs.

Germany, France and Italy are working to finance increased defense spending, industry revival and welfare systems affected by aging populations.

"My first reaction is thank God that we'll retire soon because I think we will be more and more under fiscal dominance," the Bank of Italy governor said, describing a situation where government requirements drive monetary policy decisions.

"If the voters are moving in that direction, I would not expect that the central bank can stop the waves," Panetta said following a presentation by Oxford University academic Beata Javorcik at an event in Rome.

Central banks influence government borrowing costs by setting short-term interest rates and affecting bond yields through market operations.

Panetta's comments follow signs of increased tensions between governments with high debt levels and their central banks, threatening decades of central bank independence.

In Japan, Sanae Takaichi's government is working to place dovish policymakers at the Bank of Japan to slow interest rate increases.

The U.S. Supreme Court rejected Donald Trump's attempt to remove a Federal Reserve governor last week.

ECB President Christine Lagarde has not ruled out participating in next year's French presidential election.

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