It could be
1. coolant level and also
2. thermostat stuck open
(but you say temp gauge is OK, so unlikely to be those)
3. temperature control knob resistor contacts dirty/broken - you can check the resistances with a multimeter when you move the knob
4. (some other electrical connection problem)
5. the interior temp sensor/fan is not working (between the A/C and recirc buttons) - a fairly common failure
6. the temperature control flap that sits above the heater matrix could be stuck in the "up" position so that no air is being directed through the matrix, and it all bypasses.
7. A/C and heating ECU (next to blower motor) could be faulty. Swap with a known good one if you can.
I had a problem with this flap being stuck in the "down" position so that all the air went through the matrix and I was roasting. I replaced the actuator motor that moves the flap, but it's difficult to get to.
With ignition on (but engine not running) if you turn the temp control to max heat and then max cold and back again, you should be able to hear (if you listen carefully) the actuator motor running to move the air control flap. If you hear nothing, the flap could be stuck (or not moving because the control knob/connection is faulty)
Edited by DaveG (06/12/2018 16:38)
Edit Reason: Added No. 7
1996 Portofino 20vt & 2000 Pearl White Plus
1985½ & 2016 2017 Fiat 124 Spider + XF Sportbrake