Like all central bankers, the Governor of the Bank of Italy, Ignatius Visco, he is used to using cautious language but this time he hasn't sent them to tell the hawks of the ECB. Visco is perfectly aware that the surge ininflation (+8,9% in September with the shopping cart at +11,1 on an annual basis as in 1983) requires a different monetary policy than in the recent past and that the rise in rates is inevitable, but it is the methods and timing that make the difference and accentuate or curb the risk of recession.
BANK OF ITALY, VISCO: "PRIORITY OF RATES RISE IS NOT RECOMMENDED"
"The high level of uncertainty surrounding the economic prospects suggests prudence - said the Governor while speaking at a conference of the Cesifin-Alberto Predieri Foundation and the European University Institute - in setting the "rhythm" of rate hikes and strongly advises against aiming at reach a predetermined terminal value for official rates”. For Visco, on the contrary, the ECB will have to evaluate the steps to be taken from meeting to meeting, but "in any case, today I do not see any obvious reason to tie our hands with hypotheses of extraordinarily high increases such as those that in some parts read, in some cases extrapolating the more recent past or the experience of other countries”.
BANK OF ITALY, VISCO: "A GREAT MISTAKE TO BLINDLY FOLLOW THE FED"
Visco gets straight to the heart of the problems and, without hesitation, sends the hawks of the ECB a very clear signal in view of the next board meetings: "To assume that the ECB blindly follows the Fed in the coming months could be a serious error“. What is the danger that the Governor of the Bank of Italy sees? That "rate hikes could have stronger repercussions on inflation when the economy has already experienced a clear slowdown, with the risk of triggering or amplifying a recession and without having - to the extent that thethe energy continue to be the engine of consumer price growth – particularly visible effects on inflation”.
