ECB faces mounting stagflation risks from geopolitical tensions. Governing Council member Boris Vujcic warned that the European Central Bank must remain "very agile and vigilant" as Iran conflict threatens to combine high inflation with weak economic growth. New ECB projections show consumer prices could reach 2.6% this year under baseline scenarios, or spike to 6.3% in worst-case supply disruption scenarios. Vujcic, who becomes ECB vice president in June, indicated rate decisions remain fluid ahead of April's meeting. The central bank is weighing two approaches: smaller, successive rate increases or larger, delayed hikes. Markets currently price in three quarter-point deposit rate increases this year from the current 2% level. The timing and magnitude of ECB action will depend heavily on incoming economic data and geopolitical developments in coming weeks.
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