“Monetary Policy and the Return of Inflation”

Ignazio Visco, the Governor of the Bank of Italy, spoke at Frankfurt School on 1 March 2023, about inflation and its challenges for central banks. His speech in the fully packed auditorium was introduced by Jens Weidmann, former president of the German Bundesbank. The event, hosted by Emanuel Mönch, Professor of Financial and Monetary Economics, was met with great interest among students, financial industry executives, and Frankfurt School staff.

In his introductory remarks, Jens Weidmann emphasised that – despite some disagreements over certain questions of central bank policy – Ignazio Visco is, in his view, one of the best economists in the ECB General Council. In ECB meetings Visco and Weidmann sat next to each other based on the alphabetical order of their last names. During joint discussions, Weidmann learned a lot about Italian politics and culture – for example, when to drink espresso and when cappuccino, he remarked with a wink. This created a relaxed atmosphere right from the start of the event.

Titled "Monetary Policy and the Return of Inflation", Ignazio Visco structured his speech along five central questions:

1. What is the nature of the current inflation and what are differences between the US and the Euro area?
2. Did the ECB respond too late to the acceleration in consumer prices?
3. Did the ECB make policy mistakes?
4. Is the ECB policy effective?
5. Should the ECB rather do too much or too little?

After starting with a review of the development of inflation in the past decades, Governor Visco talked about geopolitical developments, reasons and consequences of the currently high inflation. In this context he emphasised the large uncertainty which makes it difficult to predict whether inflationary or disinflationary pressures will dominate in the near term. For this reason, the ECB should not only consider the risks that result from acting too little, but also those that result from acting too much when next steps are to be decided. Ignazio Visco's conclusion: He sees signs that inflation is about to subside in the midterm and agrees with the ECB’s careful and balanced policy response

His speech was followed by a discussion with the audience, which clearly showed the different views of some German economists who emphasised the need for stronger ECB action, and their Italian counterpart. The event’s attendees continued their discussions at the closing reception with food and drinks at Frankfurt School’s Executive Lounge.