Bank of Italy: Tight Monetary Policy Damages Macroeconomic System

The Italian and European macroeconomic framework is “affected by tightening monetary conditions for businesses and families following sharp interest rate hikes by central banks.” The Bank of Italy writes about this in its latest report containing macroeconomic forecasts for the Italian economy over the period from 2022 to 2026. Internationally, the Italian regulator also suggested that “global trade could expand again over the next three years, averaging about 3% per year,” while prices for energy commodities, from oil to gas, “decline slightly over the forecast horizon.”

At the business level, Italian financial experts said they were concerned about the decline in investment demand, especially in the 2022-2023 biennium. “It is obvious that companies have not invested during the last two years. They invested heavily from 2016 to 2021 thanks to Industry 4.0 incentives, but at the moment, the demand for investment loans remains low. The reason is dictated by geopolitical uncertainty, as well as weak domestic demand. Weakness, which in turn is caused by income levels lower than in other countries,” said Gregorio De Felice, chief economist and head of research at the largest Italian banking group Intesa Sanpaolo, during his speech on the occasion of the launch in Milan of the annual publication “Survey on Savings and Financial Choices of Italians 2023,” prepared by Intesa Sanpaolo in collaboration with the Einaudi Center for Research and Documentation.

While the central banks of the US – the Federal Reserve – and of the European Union – the ECB – left interest rates unchanged, the Central Bank in Russia, on Friday, December 15, raised the base rate for the fifth time in a row, bringing it from 15% to 16 percent. The reason behind such a radical decision is galloping inflation, which in 2023 in Russia will reach 7.5 percent.

Report by Intesa Sanpaolo and Einaudi “Survey on Savings and Financial Choices of Italians 2023”

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