Incoming ecb vice-chair vujcic pulls the trigger: rate hikes now or ‘brutal’ ones later
Boris Vujcic does not wait for the chair to warm up. The Croatian set to become ECB vice-president in June is already rewriting the script: small hikes beginning next month or monster ones once Iran’s choke-hold on energy pushes euro-zone inflation past 6 %. The choice, he says, is binary—and the clock has run out on caution.
The 6 % ghost that haunts frankfurt
Fresh staff projections slipped to Brussels last night show consumer prices climbing 2.6 % this year under the baseline, double the target and far above the 2.1 % pencilled in before tankers started queuing at the Strait of Hormuz. If crude and gas keep gushing at premium panic prices, the model spits out 6.3 %—a level not seen since the 2022 Ukraine spike that briefly touched 10.6 %.
Vujcic, who steered the Croatian central bank through the pandemic and the euro adoption, told a closed-door seminar at the BIS on Wednesday that “supply shocks that linger longer than a fiscal quarter demand a monetary answer.” Translation: stop hiding behind the war-excuse playbook.
Markets price three quarter-point moves before christmas
Euribor futures screamed higher on Thursday morning, pricing in 75 basis points of tightening by December—an about-face from the cut-happy chatter of January. The first 25 bp lift is pencilled for either the 11 April or the 13 June meeting; the latter now coincides with Vujcic’s first week inside the ECB tower. Bundesbank boss Joachim Nagel, once a dove, publicly endorsed the timeline yesterday, warning that “energy inflation is no longer a blip—it is feeding core.”
Deposit rate today: 2 %. Expected by December: 2.75 %. That is still below the Fed’s 5.25 %, but the gap is narrowing fast and the euro has already gained two cents on the dollar since the story broke.
Why croatia’s hawk matters
Vujcic carries baggage from 2022. He watched inflation rip through the kuna-euro conversion window and remembers the political cost: coalition cracks, street protests, a central-bank governor sacked. “We learnt that waiting for geopolitics to fix itself is not a strategy,” he told the seminar, according to a transcript seen by TechBloom. “It is a gamble with people’s wages.”
His arrival tilts the ECB board 5-4 in favour of pre-emptive tightening, assuming Lagarde keeps the chair’s vote. The soft-spoken French lawyer has so far preached “data-dependence,” but staff now hand her data that screams.
The growth-versus-price dilemma is over—at least for vujcic
He concedes that hiking into a slowdown is ugly. He simply thinks the alternative—an inflationary spiral that crushes consumption harder—is uglier. “One or two moves will not tank the Economy,” he said. “Ten percent inflation already did.”
Markets agree: euro-area PMI dropped to 47.1 this week, yet the Stoxx bank index jumped 4 % on rate optimism. Investors prefer margin pain today over balance-sheet chaos tomorrow.
Bottom line
Come June, the ECB will have a vice-president who has already fired the starting gun. Traders have heard it; households will feel it in mortgage resets by autumn. The only variable left is whether Tehran opens the taps before Frankfurt opens the war-chest. Oil below $80 could still save the ECB from itself. Oil above $100 and Vujcic’s 6 % forecast becomes the floor, not the ceiling. Either way, the era of free ECB money is deader than the dodo—buried this time by a Balkan hawk with a soldering iron’s eye for melting points.