European Central Bank (ECB) Governing Council member Fabio Panetta stated on Friday that the ECB will take timely and prudent action to prevent the current energy shock from evolving into long-term inflation.

Panetta, who also serves as the Governor of the Bank of Italy, made these remarks during the annual conference of the Bank of Italy held in Rome. He emphasized that, considering the inflation outlook, a recalibration of monetary policy by the ECB is necessary.

Markets widely anticipate that the ECB will raise interest rates at its next Governing Council meeting scheduled for June 10-11, with several policymakers having already signaled such action. Panetta noted that the core focus of the June meeting will be to assess the pass-through effects of rising energy prices on overall prices.

The Bank of Italy Governor cautioned that even if the conflict in Iran were to de-escalate quickly, oil and gas prices are unlikely to return to normal levels rapidly. He pointed out that public inflation expectations are rising, and businesses are already planning price increases.

However, he also mentioned that medium-term inflation expectations in financial markets remain firmly anchored around the ECB's 2% inflation target.