G7 Japan, Visco: “Uncertainty is very high, beware of judgments”

Hiroshima will host the next G7, from 19 to 21 May. In anticipation of the summit in Japan, some ministerial meetings are already being held in Nagasaki and Nigata. Today the Minister of Health Orazio Schillaci participates in the summit, as did yesterday the minister of universities and research Bernini, who recalled the importance of openness and sharing of data from scientific research. The president of the EU Commission Von der Leyen confirmed her presence yesterday. Meanwhile, on the sidelines of the G7 in Nigata, the governor of the Bank of Italy Ignazio Visco spoke: “If there is one thing I would recommend, it is to be attentive to how we judge” the prospects for future monetary policy moves, “there is a very high level of uncertainty” due to the “not yet concluded war”, the “energy dimension which for now has returned in terms of costs” and the “global fragmentation, with the tension with China which requires a diplomatic effort” .

G7: economy holding up but uncertainty about the future is growing

Meanwhile, the economy and finance ministers of the G7 countries in the final communiqué at the end of the meeting in Japan say: “The global economy has shown resilience against multiple shocks, including the pandemic, Russia’s war against Ukraine and inflation. However, we must remain vigilant, and we must be nimble and flexible in our macroeconomic policies in a context of heightened uncertainty about the global economic outlook.” The communiqué reiterated “firm support for Ukraine for as long as necessary and we united our condemnation of Russia’s illegal, unjustifiable and unprovoked war of aggression against Ukraine. We are firmly committed – it is written – to continue to address the urgent short-term financing of Ukraine, as well as supporting neighboring countries and other severely affected countries”. The commitment to the reconstruction and repair of critical Ukrainian infrastructure was also highlighted. It then said that we will continue to work “closely with supervisory and regulatory authorities to monitor developments in the financial sector and we are ready to take appropriate actions to maintain the stability and resilience of the global financial system”. Finally, on the climate, he reiterated: “We are determined to urgently tackle climate change, through large-scale action in this critical decade, in order to keep the increase in global temperature within the limit of 1.5 degrees”.

Visco: “Banks are cautious, they feel the risks of the economy”

“The risks of the real economy are beginning to be felt and the banks are more cautious at a European level, not just in Italy”, said governor Visco, adding that the slowdown in credit to businesses and households is the answer to two questions: the increase in interest rates, which acted on demand, and “the supply of credit linked to the financial tensions that have emerged in the last period, which Europe has absorbed without serious difficulties but the risk has remained”. He then went on to say that “the tension with China has its reasons but it requires a considerable diplomatic effort, both in terms of economic diplomacy and tout court, because we must keep the dialogue open and deal with the problems that affect us together. I believe that it is convenient for no one to forcefully underline issues which can then be the object of different evaluations according to the data that come to appear”.

G7, Visco: “The enlargement to include Asian countries and Brazil is good”

According to Visco, the expansion, wanted by the Japanese presidency, of the G7 confrontation to include some Asian countries and Brazil is “an excellent sign”. “One cannot help but pay attention to the fact that international collaboration continues to operate on a wide scale. The world has problems that have a global dimension that can only be tackled by all, such as climate change, extreme poverty, the same pandemic and the risks of other epidemics.From this point of view it is clear that dialogue cannot be reduced and (enlargement) was an excellent initiative by the Japanese presidency and it seems to me that there is an excellent response from these Villages”.

Visco: “Rates continue to rise, but the trend is slowing down”

“In the seven times that we have increased rates, we have gone from an increase of 75 points to one of 50 and then 25. This is the trend with respect to size but the direction continues to be that against the risks of inflation spreading”, Visco added again at the end of the Financial G7 in Japan, explaining that “monetary policy needs time to spread” and that “the transmission is taking place as expected. Then we’ll see”. The governor recalled that every time we reason “on the basis of the data that gradually becomes available: the factors of inflation, the state of demand and also the rapidity of the decline in inflation in the medium term. We need to understand how the economy is doing and how effective monetary policy is”.