ECB’s Visco: Risks More Balanced, But Outlook Remains Uncertain

17 June 2021

By David Barwick – FRANKFURT (Econostream) – Risks are more balanced, but the outlook remains uncertain and this will make inflation forecasting difficult, European Central Bank Governing Council member Ignazio Visco said Thursday.

In a speech to the IIF G20 conference, a text of which was provided by the Banca d’Italia, which he heads, Visco cautioned that ‘we are not out of the woods yet.’

‘Risks have become more balanced, but uncertainty regarding the timing and path of the global recovery remains substantial’, he said. This uncertainty has to do with the pandemic as well as with the unknown extent of changes in the wake of the pandemic, he said.

‘The extent of the economic damage it has inflicted, notwithstanding strong policy support, will become more evident as these measures are gradually, gradually unwound’, he said. ‘The large dislocations in supply and demand it has caused, which are especially marked in some sectors, coupled with the pickup in commodity prices, will complicate the assessment of the inflationary outlook for some time.’

Visco warned against premature withdrawal of policy support, in which respect ‘it will be critical to preserve the financial system’s lending capacity without compromising its stability’, he said.

‘The risk that corporate insolvencies will soar once measures have been lifted needs to be monitored’, he said, though he added in a departure from his speech text that this risk was ‘lower than it was anticipated only a few months ago.’