ECB's Visco says ECB will counter any unjustified rise in interest rates

© Reuters. FILE PHOTO: Bank of Italy Governor Ignazio Visco presents Bank of Italy’s annual report in Rome, Italy, May 29, 2020. Alessandro Di Meo/Pool via REUTERS

ROME (Reuters) – Economic recovery prospects in the euro zone remain uncertain and the European Central Bank will counter any strong rises in interest rates that are not justified by economic conditions, governing council member Ignazio Visco said on Monday.

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 premature withdrawal of monetary stimulus.

In the current situation “uncertainty over the timing and the strength of the recovery require that financial conditions remain supportive for a long time,” he told the Bank of Italy’s annual assembly.

“Large and persistent rises in interest rates are not justified by the current economic prospects and will be countered,” Visco said, adding that the ECB was ready to make “full use of its already defined bond-buying programme.”

In other remarks, Visco urged the ECB to adopt a symmetrical inflation target of 2%, saying this would be “clearer” than the current policy aiming for inflation close to but below 2%.

The change would be “clearer and would reinforce the anchoring of medium and long-term inflation expectations,” he said.

Turning to Italy, the central bank chief said several Italian banks, mainly small ones, had structural weaknesses and should “urgently” reconsider their business model.

Any bank failures “will be handled trying to ensure that the lenders “exit the market in the most orderly way possible,” he said.

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