European Central Bank Governing Council member Ignazio Visco warned that everyone needs to play their part in avoiding second-round inflation effects.
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European Central Bank Governing Council member Ignazio Visco warned that everyone needs to play their part in avoiding second-round inflation effects.
“So far, a strong wage–price spiral in the euro area is not discernible and overall price expectations appear to be well-anchored,” he said in a paper published Tuesday and distributed to press on Saturday.
“However, in the absence of responsible behavior by all economic agents, with the possible triggering of second-round effects, the achievement of price stability would become more difficult and costly, as it may require some further tightening of the monetary stance,” Visco said.
The ECB is less than a week away from its next interest-rate assessment, when it will almost certainly raise borrowing costs again. Whether policymakers slow the pace of moves to 25 basis points or maintain their 50 basis-point momentum will probably depend on inflation and bank-lending data due on Tuesday, just two days before the decision.
“Evidence suggests that monetary policy has already started to exert its impact,” Visco said. “In the absence of further shocks, the progressive unfolding of its lagged effects will further contribute to bringing inflation back in line with the medium-term definition of price stability.”
Visco, who heads Italy’s central bank, isn’t the first official to have highlighted responsible actions to avoid wage-price spirals. His German counterpart, Joachim Nagel, has also done so repeatedly.
(Bank of Italy corrects date of publication in second paragraph)
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