ROME (Reuters) – Rapid declines in energy costs should help curb inflation in Europe, Bank of Italy Governor Ignazio Visco said on Saturday, urging firms not to push back on prices by letting prices persist. Move higher to seek improved margins.
European Central Bank Governing Council member Visco said the key question was what happened to inflation now that energy prices have come down from the peaks hit after Russia invaded Ukraine last year.
“I expect at this point also that the rise in what we call core inflation has cooled somewhat, which should reflect lower energy costs,” Visco told the Turin International Economic Festival. .
“If that happens, (ECB) monetary policy is certainly on the right track for now, even though I might urge a more gradual approach,” he added.
Euro zone inflation eased more than expected in May, sparking debate over whether the ECB will need to raise rates further than expected later this month.
Core inflation, which excludes volatile food and fuel prices and which plays an increasing role in the ECB’s policy deliberations, fell to 5.3%.
Visco warns of wage price spiral, saying wage growth should be done in the context of economic growth, not chasing inflation.
He also said businesses could play a role in ensuring inflation was kept in check so the ECB didn’t have to keep pushing up borrowing costs.
“It’s not in the company’s own interest … to fail to reflect lower energy costs in prices because then financing costs would go up,” he added.