Incoming ecb vice-chair vujcic: hike now or pay dearly later
Boris Vujcic lands at the European Central Bank in six weeks. By July he wants the first rate increase on the books, or inflation will rip past 6 % if Iranian chokepoints stay clogged. The admission, delivered in a closed-door briefing in Frankfurt on Tuesday, rips up the ECB’s own forecast of a 'soft landing' and forces markets to price three 25-basis-point moves before Christmas.
The 2.6 % headline is already dead
Staff economists quietly shredded the winter projection once Brent punched above $95 a barrel. The new base case—2.6 % CPI for 2024—assumes the Strait of Hormuz reopens by May. Leave it shut and consumer prices vault to 6.3 %, a level not seen since the eurozone’s 2022 scar tissue was still fresh. Vujcic’s message: waiting for geopolitical clarity is a luxury the Governing Council can no longer afford.
He framed the choice with surgical coldness: ‘a series of small steps starting now, or larger shock therapy later.’ The first path keeps options open; the second slams credit channels just as corporate refinancing peaks in September. Bond traders heard the signal—Euribor futures posted their biggest one-day jump since the Lehman scramble.
Why april, not june, now feels inevitable
Board members who spent February whispering about ‘data dependency’ switched verbs this week. Bundesbank chief Joachim Nagel went public, saying the 2 % deposit rate is ‘incompatible with persistent energy pass-through.’ Markets translated the doublespeak: a 25 bp move on 11 April is fully priced, with swaps implying a second hike by June and a third in October that would take the depo to 2.75 %.
Vujcic shrugged off the recession lobby. ‘One or two adjustments do not crater activity,’ he told analysts, pointing to still-loose corporate spreads and record employment. His bigger fear: 1970s-style second-round effects if unions front-load 2025 wage deals expecting 4 % inflation forever.
Ukraine’s ghost in the room
The Croatian economist drew a deliberate line between today’s energy spike and Putin’s 2022 supply siege. Back then inflation topped 10.6 %; this time, he insists, the ECB ‘learned the lesson’ that supply shocks left untreated metastasize. Translation: yesterday’s ‘transitory’ excuse will not be recycled.
Still, the analogy haunts him. Storage tanks across the EU are fuller, LNG terminals dot the North Sea, yet satellite data shows Chinese freight traffic through Hormuz down 38 % in ten days. If Tehran’s drones keep shadowing tankers, even a hawkish ECB faces a stagflationary vise: curb demand with tighter money while supply keeps pushing prices north.
Bottom line: investors betting on a dovish pivot once Vujcic takes his vice-presidential seat are positioned for pain. The policy fuse is already lit; the only question is whether the first hike arrives in April or the Governing Council waits until June and then delivers 50 bp in one gulp. Either way, the era of zero-cost euros is definitively over, and every week of delay adds another digit to the inflation print that nobody wants to own.