Italy’s Prime Minister Giorgia Meloni on Wednesday criticized the European Central Bank’s (ECB) “simplified prescription” of raising interest rates to fight inflation, fearing “the cure will be more harmful than the disease”.
“The simple recipe for a rate hike by the ECB does not seem to be the right way for many,” she said in a speech to parliament, in which she took stock with a view to the next EU summit.
“In our countries, the general price increase is not due to an economy growing too fast, but to endogenous factors, first and foremost the energy crisis caused by the conflict in Ukraine,” she said.
A position that comes a day after a statement by ECB President Christine Lagarde: “Unless our outlook changes significantly, we will continue to raise rates in July,” the former French minister said at an ECB forum in Sintra, Portugal .
A policy the Italian government disagrees with because “there is a risk that the steady rise in interest rates will hit our economies harder than inflation,” Ms Meloni said.
At its last monetary policy meeting in June, the ECB decided to raise its key interest rate by a quarter of a percentage point for the eighth time in less than a year and to raise the key interest rate on deposits to 3.5%.
On that occasion, Ms Lagarde had described the prospect of a July rate hike as “very likely” for their next meeting.
The ECB launched this unprecedented cycle of monetary tightening a year ago to counter rising prices, and some are now calling for a pause to avoid further weighing on economic activity.
The head of the institute, on the other hand, warned on Tuesday against a “turnaround in monetary policy that was too quick” in view of a “more stubborn inflation process” in the euro zone.
Inflation in the euro zone eased to 6.1% over a year in May, well below the record 10.6% reached in October but also well below the 2% target set by the central bank.
In its most recent forecasts, published in June, the ECB forecast inflation of 5.4% this year, falling to 2.2% (or 2.3% excluding energy) in 2025.