ECB’s Visco: Worsening Growth Prospects Won’t Force ECB to Abandon Post-September Tightening
28 July 2022
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Ignazio Visco on Thursday did not want to commit to a particular magnitude for the expected ECB interest rate hike in September, but suggested that tightening would continue beyond that month despite the brewing economic storm.
In an interview with Politico, Visco, who heads Banca d’Italia, said the September decision would be based on ‘the developments in prices and in the real economy, because the real economy affects prices. … What we see in the real economy, certainly it is not terribly encouraging.’
He doubled down on the economic gloom, saying with reference to the latest indicators that ‘everything was dismal’.
‘China is an uncertain case, but certainly the zero Covid policy is not helping’, he was quoted as saying. ‘And in the United States, a technical recession cannot be excluded.’
Visco said that in the short run, the difference in official borrowing costs between the euro area and the US ‘certainly has a role to play.’
‘I'm not prepared to say that we are going to have another 50 [basis points] in order to go as quick as possible towards the target, which we still don't know really where it is’, he said.
However, the darkening growth prospects aren't such as to force the Governing Council to abandon its tightening intentions after September, given that monetary conditions are still very loose, Politico reported him as saying.