MNI BRIEF: ECB Rate Peak At 3% Possible, Visco Says

An increase in European Central Bank interest rates to 3% in 2023 is “a possibility” and within “the range that we may reach,” Bank of Italy Governor Ignazio Visco said during a virtual event on Thursday.

The 2.25-2.50% terminal rate range mentioned by Bank of Spain Governor Pablo Hernandez de Cos is “reasonable,” Visco said, adding that “level would be when we observe certain things,” in line with the ECB’s meeting-by-meeting approach to rate-setting.

The ECB should be “gradual but continuous,” paying attention not only to wages and inflation expectations, but also to financial stability risks, he said.

Asked about the ECB’s Transmission Protection Instrument designed to suppress any blowout in spreads, Visco said “If you say that you intervene it has to be unlimited,” in order to deter speculators. The ECB should focus more on spreads than yields when deciding whether to deploy the instrument, he said.