The European Central Bank’s aggressive monetary policy began to raise doubts not only among individual experts but also among policymakers. Some officials started talking about the need to slow down the pace of interest rate hikes.
The first one to bring up the issue of a less aggressive policy stance was European Central Bank Governing Council member Ignazio Visco. "The need to continue with restrictive policy is ... evident, although reasons to follow a less aggressive approach are gaining ground," Visco said in a speech in Rome. Given that such a view was voiced by the current member of the ECB board, it might make sense to heed and adjust trading strategies amid possible shifts in the monetary policy pursued by one of the world’s largest financial regulators.
Notably, the ECB has lifted interest rates by a combined 200 basis points since July, which is the fastest pace of monetary policy tightening in the bank's history. Market expectations priced in the quotes indicate that the next step of the central bank will be a 50-basis-point rate hike. At the same time, some investors predict an ever bigger move, which suggests an increase of 0.75 points in December.
Ignazio Visco warned of the risk of policymakers being set on a predetermined path, noting that future monetary policy decisions must be based on data and evidence. According to him, long-term inflation expectations in the euro area remain "anchored" near the central bank’s target.
