MNI: Negative Rates Policy Can Now Be Left Behind- BOI Visco

A change in the economic outlook in recent months means the ECB's negative key rates policy can now left behind”, although policymakers should proceed “by taking account of the uncertain evolution” of the economy, Bank of Italy Governor Ignazio Visco said Tuesday.

Flexibility will remain a key element for the Governing Council “in the event that malfunctions in the monetary transmission mechanism risk compromising the pursuit pf price stability”,Visco said in the the concluding remarks at the BOI annual report gathering (MNI SOURCES1: ECB Seen Making Two To Three 25-BP Hikes In 2022).

Visco stressed that the rise of the Italian spread for ten-year bonds above 200 basis points in the last weeks “does not reflect any abrupt changes in the underlying economic conditions”. However, he called for a common fiscal policy at European level similar to the NGEU program as a solution in order to avoid market fragmentation and to have permanent fiscal capacity to not “create ad hoc programmes each time as happened after the sovereign debtcrisis and during the pandemic”.

“In this way, confidence would be bolstered in Europe’s capacity to intervene promptly when necessary”, Visco said.