Italy has shown “relatively solid
economic growth and faster disinflation”, European Central Bank
(ECB) board member Isabel Schnabel said at the Bocconi
University in Milan on Friday.
In a keynote speech titled ‘Has the fight against inflation been
won?’, Schnabel told students the “dream of central bankers is
to win the battle against inflation without causing a recession”
and that this is a goal “we are working towards”.
However, “we must be careful not to ease financial conditions
too soon”, she added.
“We have to be cautious” on rates because “the last mile” of the
fight against inflation “is the most difficult”, she continued.
An ECB survey of 11 eurozone countries published on Friday shows
that inflation expectations for the next 12 months have
increased by 0.1 percentage point to 3.3% from 3.2%, while those
for three-year inflation have remained unchanged at 2.5%.
Schnabel said the economy in the eurozone is “bottoming out and
recovering gradually” due to a resumption in consumer spending
driven by rising wages and also by the fact that “we have passed
the peak of the impact of the monetary tightening policy”.
The spread between Italian and German 10-year bond yields has
remained “very, very low”, and this “is remarkable because we
have had the steepest cycle of rate hikes” in history, she
continued.
Schnabel attributed the resistance of the Italian spread to
“national policies in Italy” as well as to “the Tpi programme”,
the anti-spread shield introduced by the ECB in 2023.
The ECB executive board member said Italy’s debt-to-GDP ratio
remains “relatively high” and that it is “desirable to bring it
down”.
“However, what we have learned is that fiscal consolidation
alone is not enough if there is no growth,” she added.
Ensuring “long-term growth” remains a major challenge not only
for Italy but for “the entire eurozone”, Schnabel told students,
adding that Italy “has fiscal vulnerabilities” despite its low
spread.
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