The European Central Bank (ECB) must avoid pushing real interest rates too high, given the level of private and public debt in the euro area, a top Italian policymaker said on Saturday.
ECB Governing Council member Ignazio Visco, who is also the Bank of Italy's governor, also said he did not believe a recession was inevitable in order to reduce inflation.
The ECB has raised interest rates by 3 percentage points since July and promised a 50 basis-point hike for March. "Today, disinflation is obviously needed, but given the levels of private and public debts that prevail in the euro area, we must be careful to avoid engineering an unnecessary and excessive rise in real interest rates," Visco told the Warwick Economics Summit.
"Indeed, I am convinced that the credibility of our actions is preserved not by flexing our muscles in the face of inflation, but by continually showing wisdom and balance."
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