Visco Warns Against Prematurely Reducing ECB Stimulus Amid Slack

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

The European Central Bank must be careful not to reduce monetary stimulus too soon to convince investors that it’s serious about meeting its inflation goal, according to Governing Council member Ignazio Visco.

“We have to avoid tapering before the time comes that we’re really confident we’re back where we should,” Visco, who also heads the Bank of Italy, said in a Bloomberg Television interview on Thursday. “We really have to show to be determined.”

Visco’s comments come one week ahead of a key ECB meeting where policy makers will have to decide how to adapt their language on interest rates, bond-buying and other tools to their new inflation strategy that allows prices to grow moderately faster than 2% for a transitory period. President Christine Lagarde unveiled the results of an 18-months review last week.

“I don’t expect monetary policy to be tightened for a long period,” Visco said, pointing to “substantial slack” in the euro-area economy and risks related to another wave of coronavirus infections. The ECB hasn’t discussed a potential extension of its pandemic purchase program beyond its current end date in March, he said.

Visco’s colleague Isabel Schnabel, a member of the ECB’s Executive Board, argued Wednesday that euro-area inflation might be closer to meeting its goal than some anticipate. At the same time, she said the Governing Council will take its time before tightening monetary policy to ensure price developments are entrenched.

©2021 Bloomberg L.P.