Rate Hikes Were Necessary, but Should Have Been More Gradual, ECB’s Visco Says

3 June 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member Ignazio Visco said on Saturday that he agreed with the current monetary policy stance but would have preferred a more gradual series of rate hikes.

Speaking at the International Economy Festival in Turin, Visco, who heads the Bank of Italy, said that the ‘monetary policy [stance] is certainly the correct one at the moment, although I would perhaps have pushed for more gradualness.’

The ECB’s decision to rapidly tighten interest rates was ‘the right one to keep drivers of demand under control and meet the aim of stabilising prices’, he said.

However, governments ‘must not leave monetary policy to operate on its own’, he said. ‘It must be accompanied by a prudent fiscal policy and the responsibility of social partners’, he argued, with firms and employee associations needing to avoid ‘setting in motion a situation where prices and wages chase each other’.

Regarding the outlook for inflation, he said he expected ‘core inflation to reflect the reduction in the cost of energy’.