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00:00FOR THE PAST 24 HOURS, THE WORDS THAT I HEAR THE MOST IS INFLATION. THIS NEED TO ADJUST MONETARY POLICY AND NORMALIZATION. THOSE WORDS COME OUT A LOT. WHEN YOU LOOK AT NORMALIZATION, WHAT DOES IT MEAN FOR YOU WHAT THE BANK OF ITALY? IGNAZIO: VERY GOOD MORNING. I THINK WE SHOULD START BY -- WE THOUGHT IN THE PAST YEARS, THE RISKS OF INFLATION AND THE RISK OF THE PANDEMIC GENERATING A PERMANENT RECESSION. WE HAVE BEEN ABLE TO SUCCESSFULLY COUNTER THESE RISKS. HOW DID WE DO? WE DID THESE SET OF UNCONVENTIONAL MONETARY POLICY MEASURES. ONE OF THEM HAVING OFFICIAL INTEREST RATES IN NEGATIVE TERRITORY FOR A LONG PERIOD. NOW, I THINK WE CAN MOVE OUT OF THIS NEGATIVE TERRITORY FOR VARIOUS REASONS. DEMAND IS BACK, REALLY EVEN IF NOT AS HIGH -- IT IS MORE OR LESS UP A LEVEL THAT IT WAS BEFORE THE PANDEMIC STARTED. BUT ALSO INFLATION -- NOW IT IS AROUND 2%. THEY WILL STAY THERE. THEREFORE, WE CAN MOVE AND WE CAN MOVE GRADUALLY, RAISING INTEREST RATES IN THE COMING MONTHS. MARIA: WHEN YOU SAY WE CAN MOVE GRADUALLY, WHAT DOES THAT MEAN TO YOU? JUNE, JULY? MAYBE IT IS NOT A TIME TO PUT A SPECIFIC MONTH ON IT? IGNAZIO: JUNE, CERTAINLY NOT. IN JUNE, WE ARE STILL PURCHASING ASSETS FOR OUR APP PROGRAM. WE WILL END IT. CLEARLY, WE HAVE ALSO STATED EVEN IF WE ARE NOT PRISONERS OF OUR FORWARD GUIDANCE, BUT WE HAVE STATED WE WILL MOVE AFTER THAT. AFTER MEANS PERHAPS JULY. AND GRADUALLY MEANS, IN MY VIEW, THAT WE HAVE TO UNDERSTAND THAT WE SHOULD MOVE WITHOUT CREATING UNCERTAINTY IN THE MARKET. OBVIOUSLY, THERE HAVE BEEN MANY VOICES IN THE LAST FEW WEEKS. I TRY TO REFRAIN FROM INTERVENING TOO MUCH. I THINK THAT WE SHOULD CONSIDER VERY CAREFULLY WHAT WE SHOULD DO ON THE BASIS NOT ONLY OF THE DATA, BUT ALSO THE ASSESSMENTS, THE ANALYTICAL ASSESSMENTS WE CAN PROVIDE. SO WE SHOULD MOVE GRADUALLY. WHICH WE REALLY HAVE TO STILL DECIDE. IT ' S NOT OBVIOUS WHERE. WHEN DEPENDS VERY MUCH ON THE STATE OF UNCERTAINTY. WE ARE LIVING IN A VERY HIGH UNCERTAINTY NOW BECAUSE OF THE VARIOUS EVENTS AND THE THE MOST DRAMATIC ONE BEING THE INVASION OF UKRAINE BY RUSSIA. WE HAVE TO BE DEPENDENT ON THE DATA AND THE ANALYSIS. I THINK WE SHOULD MOVE GRADUALLY AROUND THAT. MARIA: YOU MAKE A VERY GOOD POINT, STAYING FOCUSED ON THE DATA. BUT WHEN YOU HEAR OTHER VOICES SAYING 50 BASIS POINTS, PERHAPS WE CAN DO IT EVEN FASTER THAN WE THOUGHT, IS THAT ACTUALLY A GOOD IDEA? TO PERHAPS TALK SO MUCH, SO AGGRESSIVELY WITHOUT NEW DATA? IGNAZIO: THIS IS SOMETHING I HAVE BEEN REPEATING TO THE GOVERNING COUNCIL. I PREFER THINGS BEING DISCUSSED IN THE COUNCIL RATHER THAN TAKING PLACE IN THIS WAY. ON THE OTHER HAND, WE ARE OBVIOUSLY FREE TO SAY WHAT WE THINK MOST APPROPRIATE. BUT THEN WE ARE TO LOOK AT THE EURO AREA AT-LARGE. THERE ARE CERTAIN ISSUES WE CLEARLY HAVE TO TAKE INTO ACCOUNT. WE HAVE TO -- A WAGE PRICE SPIRAL TO START WITHOUT REALLY KNOWING HOW IT WILL END. WE HAVE TO UNDERSTAND WE ' RE DIFFERENT THAN THE UNITED STATES. WE DON ' T HAVE EXCESSIVE DEMAND PRESSURES. WE HAVE SUBSTANTIAL COST PUSH FROM ENERGY PRICES THAT STARTED FROM THE GEOPOLITICAL SANCTIONS AND ENDED UP BECOMING PERMANENT RATHER THAN TEMPORARY BECAUSE OF THE RUSSIAN INVASION OF UKRAINE. MARIA: CAN I ASK YOU WHEN YOU SAY ANCHOR THE EXPECTATIONS, CAN THE MARKET TRUST THAT THE ECB WILL ANCHOR INFLATION EXPECTATIONS? THAT YOU ARE IN THE POSITION TO DO IT? IGNAZIO: WE ARE NOW HAVING INFLATION AT 6%, 7%. MEDIUM-TERM ARE THE ONES WE LOOK FOR. THEY HAVE TO TRUST BECAUSE WE ARE REALLY FIGHTING THE RISK OF INFLATION, EVEN IF THIS NONSENSICAL DISTINCTION -- I THINK ALL THE GOVERNING COUNCIL MEMBERS CLEARLY SEE INFLATION ABOVE 2% AN D SOME CANNOT BE PERMANENT FIXTURES. THERE ARE RISKS, BUT THE NATURE OF RISK IS THAT THE PURCHASING POWER LOSSES ARE TAKING PLACE BECAUSE OF THE RISING ENERGY COSTS. MAY BE CONSIDERED TO BE MET BY MONETARY POLICY. MONETARY POLICY REALLY HAS TO AVOID EXCESSIVE DEMAND PRESSURES, BUT THE COST PUSH US TO. THERE IS A LOSS THAT WE HAVE TO ACCEPT BECAUSE -- ON THE OTHER, THERE MIGHT BE SOME REDISTRIBUTION EFFECT THAT COULD TAKE PLACE ON THE PART OF THE PUBLIC FINANCES. MARIA: ON THAT NOTE, THE FORECAST FOR YOU YOU SAY ARE ALWAYS IMPORTANT BUT WE ARE SEEING BIG DIVERSIONS BETWEEN THE FORECAST AND THE REAL NUMBERS THAT COME IN. WHAT IS THIS CAP AND IS THERE A WAY TO PERHAPS ADJUST IT AND COME MORE IN LINE AT BANK ITALIA? IGNAZIO: WE DO NOT HAVE A CRYSTAL SPHERE. WE DO NOT PREDICT THE FUTURE. WE HAVE FORECAST AND WE MAY PROJECT ON THE BASIS OF ASSUMPTION. ONE WAS CLEARLY WRONG. MARIA: YOU SAY IT WAS WRONG. IGNAZIO: THE ABSENCE OF THE BOTTLENECKS THAT WERE VISIBLE AROUND THE MIDDLE OF LAST YEAR, WE PROBABLY SHOULD HAVE CONSIDERED THE PUSH FROM FISCAL EXPANSION INTO THE U.S. MIGHT HAVE GENERATED HIGH DEMAND PRESSURES. THAT WAS NEXT. NOW WE SEE THE RISK AGAIN OF A SECOND BOTTLENECK, IF YOU LOOK AT THE ZERO COVID POLICY AFFECTS ON THE PARTS OF CHINA IN THE TRANSPORT OF INTERMEDIATE GOODS, WHICH IS REALLY CAUSING ANOTHER CONSTRAINT ON THE SUPPLY. AS PART OF THE OIL AND GAS PRICE INCREASES, WE CONSIDER THEM TO BE TEMPORARY. IS IT A MISTAKE? WELL, BASICALLY, WE DIDN ' T PREDICT THE WAR. SHOULD WE HAVE PREDICTED IT? I DON ' T KNOW. WE CERTAINLY DO NOT -- WE SHOULD HAVE ORGANIZED OURSELVES BETTER. YOU ARE ALSO TRYING TO UNDERSTAND THE GEOPOLITICS OF THINGS. CLEARLY, WE DIDN ' T THINK THAT WOULD TAKE PLACE. MARIA: OF COURSE, YOU ARE KEEPING THAT IN MIND AND GOING INTO THE FUTURE. THANK YOU SO MUCH FOR YOUR TIME HERE AT THE G7 AND ENJOY THE REST OF THE DAY.

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Visco Says July May Be Right Time for First ECB Hike

July might be the right moment for the European Central Bank to increase interest rates for the first time in more than a decade, Governing Council member Ignazio Visco said in an interview with Bloomberg Television's Maria Tadeo on May 20. June is too early as that is when the ECB will end net bond purchases, the Bank of Italy governor said. (Source: Bloomberg)

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