Interest rate effect on Bank of Italy transitory

MILAN, March 31, 2023 - "I am optimistic about Italy's inflation levels. Despite today's rebound in gas prices, the trend regarding raw materials prices has definitely stabilised, compared to what we expected six to seven months ago. The measures put in place by central banks have helped a lot. Now, we must carefully look at the stability of the financial system, in particular the U.S. one, because Europe's is definitely more stable,” said Webuild General Manager Massimo Ferrari on Menabò, a programme on Italian state broadcaster Rai Radio Uno. His comment followed Friday’s publication of data highlighting a slowing of inflation in March even though grocery prices have kept rising. 

"Inflation is still being felt," continued Ferrari. "But the reduced pressure coming from raw materials as well as the actions being taken by central banks are having their effect. Looking ahead, I see positive signs. We must acknowledge what has been done by central banks as regards monetary policy."

"There's still an open issue, and this is maybe the reason for the lukewarm reaction on the part the stock market, compared with the bond market, which reacted positively today. (This issue is) the uncertainty that still remains with regards to credit in the United States. In the U.S., there are still significant stability risks. This is why the U.S. Treasury Secretary Janet Yellen spoke of the need to re-regulate the banking sector."

As regards the comment made by Bank of Italy Governor Ignazio Visco that the bank will have to face a negative gross result since the ECB’s interest rate increase has led to an immediate cost increase on its balance sheet, Ferrari said “the rise in rates has weighed on all central banks, which hold state debt whose market value has dropped. We can consider it a transitory effect that will likely correct itself next year.”