MNI BRIEF: Overtightening Also A Risk For ECB -Visco
The ECB should beware of raising rates too much, the Bank of Italy's head says.
The risks from overshooting in monetary tightening may be at least as great as those from doing too little to combat inflation, Bank of Italy’ Governor Ignazio Visco said on Monday.
“I am not convinced that today it's better to risk restricting too much rather than do too little,” Visco told an event in Rome. While future rate hikes will be needed to return inflation to the 2|% target, “careful and knowledgeable assessments of the intensity” of increases will be essential, he said, “considering the development, in both directions, of the factors underlying the inflation dynamics”.
The eurozone can bring inflation down without falling into recession, he said, adding that if higher rates sap economic activity and employment too much it would be more difficult to achieve the 2% mandate in the medium term. His comments came as MNI has reported doves are pushing to possibly reduce the pace of rate hikes. (See MNI SOURCES: ECB Doves Eye Smaller Hikes As Inflation Falls)“If the cost of energy does not rise significantly, core inflation will also fall not too long afterwards,” Visco said, adding that it is also necessary for inflation expectations to remain anchored