ECB’s Visco Urges Gradual Approach to Rate Hikes, Warns Against Clear Pre-Commitments

23 January 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – ECB Governing Council member Ignazio Visco on Monday urged that the ECB implement rate hikes in a gradual manner and carefully consider the impact of further interest rate increases on all Eurozone economies.

Speaking at an event hosted by the Ambrosetti Club in Rome, Visco, who heads Banca d’Italia, said the normalisation of monetary policy must ‘proceed with the necessary gradualness’. He conceded that further rate hikes ‘are on the cards,’ but emphasised the need for ‘careful and conscious assessments of the intensity and timing’ of their impact.

Asked about the ECB’s approach to the next two meetings of the Governing Council, he said that talk of multiple 50bp hikes ‘contradicts a bit’ the ECB’s meeting-by-meeting, data-driven approach to monetary policy decisions. He added that he was convinced that the ECB needed ‘to improve in terms of communication’ in this regard.

Regarding statements from his Council colleagues in recent weeks about the pace of future rate hikes, he said that ‘what worries me is that we give messages that are too hard and where we basically scare rather than support.’

ECB President Christine Lagarde indicated in December that policymakers 'expect to raise interest rates at a 50bp pace for a period of time’.

A recession would not be necessary to get inflation under control, he said. It was ‘entirely possible’ and ‘in line with our forecasts’ that the ECB would return inflation to its target of 2% without harming economic activity and employment, he said.

‘Medium to long-term inflation expectations are anchored’, he said, and there are currently ‘no signs of a wage-price spiral’, though wage developments would have to be carefully monitored.