Ignazio Visco, a member of the European Central Bank’s Governing Council, criticized some of his colleagues on Wednesday for their comments on future interest rates, which diverge from what was agreed at ECB meetings.
Visco’s intervention sets the stage for a heated debate at next week’s meeting, at which the central bank plans to raise interest rates for the sixth time in a row and chart the way forward in its fight against high inflation.
Visco, like his Italian ECB Executive Board colleague Fabio Panetta, is considered a “dove” of monetary policy, referring to the reluctance to aggressively raise rates for fear that they will hurt the economy.
“The uncertainty is so high that, as the Governing Council, we agreed that we would decide meeting by meeting, with no future guidance,” the Bank of Italy governor said in a speech in Rome, departing from a previously distributed written text.
“For this reason, I do not appreciate the comments of my colleagues about future and prolonged rate hikes,” Visco added, in unusually blunt remarks that highlight a growing divide at the Frankfurt-based ECB.
Visco said that although the ECB had managed to stabilise inflation expectations, geopolitical uncertainties made it difficult to predict economic developments.
“Therefore, monetary policy should continue to move prudently and be guided by data as it becomes available.”
The ECB is raising rates at the fastest pace in its history, and its chief economist, Philip Lane, said on Monday it is still likely to continue raising rates after a 50 basis point hike this month that has already been virtually announced in advance.
Other members of the Governing Council, seen as monetary policy “hawks” — who attach paramount importance to curbing inflation even if it means damaging growth and employment — have gone further.
Austrian Central Bank President Robert Holzmann said Monday that the ECB should raise the rate by 50 basis points at each of its next four meetings as inflation is proving stubborn.
Thus, the deposit rate would stand at 4.5%, well above the maximum of 4% predicted by the markets, a level that no other monetary policymaker has defended so far in public.
German Bundesbank chief Joachim Nagel has called for significant hikes after March and the Netherlands’ Klaas Knot has also said he expects a big rate hike in May if core inflation does not fall.
The ECB will not hold any meetings in April.