ECB's Muller: Current baseline projection could be already too optimistic

ECB policymaker Muller expressed skepticism about the central bank's current economic baseline projection, suggesting it may be overly optimistic given evolving economic conditions. This commentary intensifies concerns over weaker-than-expected eurozone growth, potentially limiting the ECB's ability to maintain a hawkish monetary stance despite inflation. The euro and eurozone sovereign bonds are particularly exposed, as diminished growth prospects could force a reassessment of future rate path expectations and delay any potential tightening. Market focus will shift to the upcoming ECB staff macroeconomic forecasts and the March 7 ECB policy meeting decision, where updated guidance on growth and inflation projections may clarify the policy outlook.

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