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ECB Governing Council member Ignazio Visco, who is also the Bank
of Italy's governor, added he did not believe a recession was
inevitable in order to reduce inflation.
The ECB has raised interest rates by 3 percentage points since
July and promised a 50 basis-point hike for March.
"Today, disinflation is obviously needed, but given the levels
of private and public debts that prevail in the euro area, we
must be careful to avoid engineering an unnecessary and
excessive rise in real interest rates," Visco told the Warwick
Economics Summit.
"Indeed, I am convinced that the credibility of our actions is
preserved not by flexing our muscles in the face of inflation,
but by continually showing wisdom and balance."
The ECB has kept its options open about subsequent steps after
March, raising doubts among investors about the extent of
further increases.
Investors and economists have focused on a peak in the deposit
rate of between 3.25% and 3.5%, which suggests just one or two
moves after the March hike and an end by mid-year.
Politicians in Italy have expressed concerns about the impact of
rising interest rates given the country's huge debts.
Visco said ECB rates must continue to rise "in a progressive but
measured way, on the basis of the incoming data and their use in
the assessment of the inflation outlook".
Inflation has dropped by around 2 percentage points since its
peak in October, and further falls are likely as natural gas
prices retreat.
But underlying price growth appears to be stubbornly high
leading to fears that inflation could get stuck at levels above
the ECB's 2% target, partly due to rapid nominal wages growth.
"I see no compelling reasons for inflation not to return to
target, notwithstanding the still abundant (and excessive)
liquidity present in the economic system," Visco said.
Looking at the persistence of inflation in many countries during
the 1970s, Visco said big improvements in monetary policymaking
and changes in European economies made that "very unlikely" to
be repeated.
(Reporting by Giselda VagnoniEditing by Mark Potter)
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