ECB Should Move Forward Cautiously, Visco Says

5 May 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank should proceed in its fight against inflation with caution, ECB Governing Council member Ignazio Visco said on Friday.

Speaking at the launch of his new book in Rome, Visco, who heads the Bank of Italy, said that there were no disagreements on the Governing Council regarding the ultimate goal of monetary policy, but simply differences about methods and timing.

Asked about the future path of monetary policy, he quoted the Italian poet Alessandro Manzoni, defining his approach to further hikes as ‘adelante con juicio’ (forward with caution).

He played down disagreements during Thursday's meeting of the Council, stating that ‘the only discussions are about the timing and methods of tightening, not the ultimate goal.’ The debate about the further path of policy was ‘not a question of hawks and doves’, he said.

The Governing Council had not had concrete discussions about the specific level of the terminal rate, he said: ‘We can't define it now. The market expects something, of course. But we're not discussing it yet.’

He said the ECB had ‘ideas about where we will end up and how we will get there. But they're just ideas.’

Hikes were being transmitted ‘energetically’ to the real economy, he said, though monetary policy transmission was subject to a lot of uncertainty: ‘we live in a very uncertain world. We must evaluate the impact of our hikes in this new world.’

Monetary and fiscal policies needed to work in the same direction, he argued. ‘The most important lesson’ from the experience of fighting inflation in Italy over the past few decades was that ‘only the coherent and cohesive action of monetary policies, budget, and […] incomes, can successfully counter inflation and quickly bring our country and the euro area back onto a path of sustained and balanced development.’