ECB Policy Decisions Were Appropriate, Not Made in Haste: Visco

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Bank of Italy Governor Ignazio Visco said the European Central Bank’s decisions earlier this month to cut interest rates further below zero and to revive bond purchases weren’t made in haste and that they are an appropriate response to the worsening economic outlook in the euro-area.

Signs of an economic slowdown and weakening inflation have intensified and geopolitical tensions and trade tariffs are weighing on confidence, investment and industrial production, Visco said, according to a transcript of a speech given in Lanciano, Italy. The ECB must counter the risk that a weakening economy and the low level of inflation translate into a permanent reduction in price expectations or a re-emergence of the threat of deflation, he said.

The ECB at its September meeting reduced the deposit rate to minus 0.5% from minus 0.4%, and said it’ll buy debt from Nov. 1 at a pace of 20 billion euros ($22 billion) a month for as long as necessary to hit its inflation goal of 2%. The ECB also cut the cost of its long-term loans to banks.

Visco said he gave his opinion on the ECB’s policy decision because of the “recent media attention given to the discussion that followed that meeting.” The policy is “fully in line with our previous decisions,” he said.

“We can debate the merits of introducing at the ECB the procedure followed by other central banks, where, following their monetary policy meetings, they publish the positions of the participants (as well as the reasons for any disagreements),” Visco said. “This solution, which I personally find appropriate, was at one point considered but then rejected by the Governing Council.”

The Governing Council deemed it necessary to respond promptly to the worsening economic situation, while opinions varied and some reservations were expressed at the meeting, Visco said.

To contact the reporter on this story: James Amott in London at jamott@bloomberg.net

To contact the editors responsible for this story: Andrew Davis at abdavis@bloomberg.net, James Amott

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