Bank of Italy’s Visco says euro zone rates need to rise further

ROME, Oct 31 (Reuters) – Interest rates in the euro zone will need to rise further in order to help reduce the risk of persistent high inflation, Bank of Italy Governor Ignazio Visco said on Monday.

Visco, who is a member of the European Central Bank’s Governing Council, said there was no doubt that interest rates were not yet at a level consistent with the objective of reducing inflation to 2%.

He was speaking at a banking conference in Rome after euro zone inflation surged past expectations yet again in October to hit a record high of 10.7%, with price pressures appearing to be broadening.

Visco cautioned that it was impossible to say how quickly rates would go up and where they would peak.

“The high level of uncertainty calls for a gradual approach, carefully assessing the appropriateness of the monetary stance on the basis of evidence as it becomes available,” he told the conference.

The ECB has raised rates a combined 200 basis points in the past three months and promised further tightening as soon as December.

Visco also suggested that the worsening economic outlook might also have an impact on how fast rates can go up.

“This is a risk that the (ECB) board will have to take into account in the coming months, as well as the risk of letting inflation remain excessively high for too long,” he added.

(Reporting by Giuseppe Fonte Writing by Keith Weir, editing by Gavin Jones)

Photo: Bank of Italy Governor Ignazio Visco. EPA-EFE/FRANCK ROBICHON / POOL