Italy warns of 'damage' from ECB interest rates hikes

AFP , Wednesday 28 Jun 2023

Italian Prime Minister Giorgia Meloni on Wednesday criticised the European Central Bank's hiking of interest rates to fight inflation, warning "the cure risks proving more damaging than the disease".

Giorgia Meloni
File Photo: Italian Prime Minister Giorgia Meloni in a speech to the parliament. AFP


"The ECB's simplistic recipe of raising interest rates does not appear to many to be the right way forward," she said in a speech to parliament ahead of an EU summit later this week.

"In our countries, the general rise in prices is not due to an economy that is growing too fast", she said, but other factors, "first and foremost the energy crisis caused by the conflict in Ukraine".

Meloni was reacting to ECB President Christine Lagarde's warning Tuesday that the bank would "continue to increase rates in July" unless there was "a material change to the outlook".

The central bank has hiked rates at the fastest pace ever over the past year in a bid to cool inflation after Russia's war in Ukraine sent energy and food prices surging.

While sky-high energy prices that drove inflation up last year have come down, ECB officials are now concerned about the impact of rising wages as workers demand higher salaries to cover rising costs, and the labour market remains tight.

Falling energy costs helped eurozone inflation slow to 6.1 percent in May year-on-year, down from a peak of 10.6 percent in October.

Nevertheless, it remains three times above the ECB's two-percent target.

Inflation in Italy slowed considerably in June, to 6.4 percent year-on-year from 7.6 percent in May, according to preliminary estimates published Wednesday from national statistics agency Istat.

The slowdown was largely due to lower inflation among non-regulated energy products (from +20.3 percent to +8.4 percent) and, to a lesser extent, of the price of processed foods including alcohol.

By contrast, the price of unprocessed food went up, from +8.8 percent on the year to +9.6 percent.

Short link: