ROME, May 31 (Reuters) – The outlook for an economic recovery in the euro area remains uncertain and the European Central Bank will oppose any sharp interest rate hikes that are not justified by economic conditions, the economic conditions said on Monday. member of the board of directors Ignazio Visco.
Visco, the governor of the Bank of Italy, said in a speech in Rome that the 2008-2009 financial crisis had shown the risks of a premature withdrawal of monetary stimulus.
In the current situation, “uncertainty as to the timing and strength of the recovery requires that financial conditions remain favorable for a long time,” he told the Bank of Italy’s annual meeting.
“The large and persistent interest rate hikes are not justified by the current economic outlook and will be countered,” Visco said, adding that the ECB was ready to “fully utilize its already defined bond buying program” .
In other remarks, Visco urged the ECB to adopt a symmetrical inflation target of 2%, saying it would be âclearerâ than the current policy of inflation near but below 2%.
The change would be “clearer and strengthen the anchoring of inflation expectations in the medium and long term,” he said.
Regarding Italy, the head of the central bank said that several Italian banks, mainly small banks, had structural weaknesses and should “urgently” reconsider their economic model.
Any bank failure “will be managed by trying to ensure that lenders” exit the market in the most orderly manner possible, “he said. (Report by Giuseppe Fonte and Gavin Jones)