Market volatility can amplify shocks to euro zone economy, ECB's VP warns

Economic Outlook - Financial market volatility can amplify economic shocks, as highlighted by ECB Vice President Luis de Guindos [1] - The ECB will evaluate various scenarios for growth and inflation in its upcoming policy meeting [1] - Oil prices have increased nearly 50% since the beginning of the year due to the war in Iran, likely raising inflation and pressuring the ECB to act [1] Policy Implications - De Guindos emphasized the need for policymakers to remain calm during the March 19 meeting, despite the complexities in forecasting [1] - The ECB is expected to raise interest rates by autumn, as financial markets anticipate that higher oil prices will influence overall prices [1] - The bank's previous experience with inflation surges in 2021/22 has made it less tolerant of inflation overshoots [1] Economic Risks - Energy price shocks are likely to negatively impact economic growth, with the ongoing war creating additional downside risks for the economy [1] - The ECB must consider the amplified effects of energy shocks on economic activity, similar to the scenarios faced during the Russia-Ukraine conflict [1]