Visco (Bankitalia): “Wages grow less than inflation. A comforting indication”. Recession only with stop gas

“Comforting” indications arrive on the front of themedium to long term inflation and “from wage dynamics, which at the moment does not seem to indicate the start of a dangerous run-up between prices and wages ”. This was stated by the governor of the Bank of Italy Ignazio Visco speaking at the annual meeting of the Italian Banking Association. These signals reveal how the goal of bringing inflation back on line “can be done by means of a gradual normalization of monetary policy and without causing an abrupt slowdown in the economy ”. The slowdown in GDP and the “risk of a contraction in economic activity” must induce banks to “take it into account” in the “policies for distributing profits and provisions”, Visco said, welcoming similar invitations received in recent days by the Bank Central European.

“Italy will end up in recession only in the event of a scenario of blocking gas supplies from Russia”, then stated Visco according to which in this adverse scenario the GDP (which should grow in line with the eurozone in the two-year period) would suffer ” an average contraction of two-year period 2022-23, to return to growth in 2024 ″. There would be “direct repercussions of this interruption on sectors with the highest energy intensity, further increases in the prices of raw materials, a more marked slowdown in foreign trade, a worsening of confidence and an increase in uncertainty”.

The rise in interest rates (scheduled for the summit on 21 July, ndr) “Should not slow down” the trend of bank loans, says Visco who points out “The impact on banks’ profitability would be positive overall thanks to the expansion of the interest margin, the performance of which will depend on the maturity structure of the assets and liabilities of the individual banks, with even significant differences between intermediaries “.

“Reactions on the financial markets that are not justified by the fundamentals of the various countries, can be countered by decisively using, as has already happened in the past, all the instruments in the possession of the central bank and, if necessary, by using new ones”, stated Visco in relation to measures under study in Frankfurt to limit the excessive expansion of yield differentials (spread) between the different countries of the euro zone. “For central bank action to be effective, it is crucial that there are no amplifications in the cost of money in individual jurisdictions (countries ndr) ”, Adds the governor

“More selective” interventions on bills – For the quarter just ended “We estimate robust growth, which brings the growth acquired for 2022 “above 3%”. The Minister of Economy said it, Daniele Franco, at the ABI assembly. In the quarter the industrial production has increased, according to the estimates of the Mef, of 2%. “The difficulties and risks ahead of us are important, however, it would be wrong to indulge in pessimism in a phase in which there are multiple signs of ferment “, underlined the minister of the economy, highlighting the growth of investments and effects of the Pnrr which will materialize from 2023 to 2026. Franco reiterated the strong elements of uncertainty, but also that “there are valid reasons to be confident that with the dynamism of our production system, with incisive government action and with the essential contribution of the parties growth will not stop ”.

“The government intends to continue” the action to contain the impact of expensive energy, but the interventions will be “more selective” and calibrated to the economic conditions of families ”, the minister said. The increase in prices linked to energy “it does not seem destined to return quickly ”Franco says, explaining that the macro picture“ deteriorated sharply ”with the invasion of Ukraine by Russia. “The increases in energy are particularly important,” he said. One of the objectives that Italy must aim for in order to cope with the possible risks of a “setback” of the economy is “to increase the employment rate, which is particularly low, looking at young people, women and the South”. In this sense, “the reduction of the tax wedge is a priority”he added, explaining that the issue will be addressed in the budget law.

The president of the ABI – “The processes of consolidation ”of the banks “They must also develop internationally, especially in Europe, to encourage the growth of banking entities that are competitive with the American and Asian giants”, said President Abi Antonio Patuelli, intervened before Visco. The president recalled how in our country “the banking combinations took place within a framework of constant strong competition. In proportion to the populations, more banking combinations took place in Italy than in other countries in the rest of Europe ”. “The strategies for the greater protection of health and the environment must have priority “and the” banks are committed to a more sustainable economy, they must always better assess climate risks “says Patuanelli who however explains how credit institutions” should not be seen as substitutes for the authorities and public functions and they must not be burdened by additional capital requirements “.

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