Ignazio Visco: Speech - 28th ASSIOM FOREX Congress

Speech by Mr Ignazio Visco, Governor of the Bank of Italy, at the 28th Congress of ASSIOM FOREX (the Italian financial markets association), Parma, 12 February 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Economic outlook, inflation and monetary policy

In 2021, the world economy recovered more than expected. Economic activity delivered a positive surprise in Italy as well, with GDP growing by 6.5 per cent. In recent months, growth has been curbed by the new wave of infections, but it is expected to pick up again starting in the spring with the gradual improvement in the health situation. At global level, according to the latest scenario published by the International Monetary Fund (IMF), GDP will expand by 4.4 per cent in 2022, half a percentage point less than was forecast in October. In the short term, risks are mainly on the downside; besides being influenced by the course of the pandemic, these risks stem above all from the ongoing geopolitical tensions and the impact they could have on the cost of commodities, especially energy products, and on trade in intermediate inputs along global value chains. According to our latest estimates, Italy's GDP growth will near 4 per cent this year on average, and will then slow in the next two years.

Since the second half of 2021, a significant, and for the most part unexpected rise in inflation has been observed in several countries. On the supply and cost side, this has been due above all to the steep increase in fossil fuel energy prices, supply chain bottlenecks and the rise in international transport costs. In the United States, a role was played by the strong growth in demand and the rise in wages, in part connected with the exit of many previously employed persons from the labour force. Pressures on the final prices of goods and services will likely be stronger than initially estimated, but should abate in 2023.