By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Peter Kažimír on Tuesday warned that the longer the war in Iran drags on and the more damage it causes, “the greater the risk of inflation will be,” meaning the ECB would have to respond “sooner and more decisively.”

Kažimír, who heads the National Bank of Slovakia, spoke as his institution presented a spring forecast built on a shorter-conflict baseline. Under that scenario, Slovak GDP would grow 0.5% this year, while HICP inflation would average 3.9%, with growth then picking up to 2.0% in 2027 and 2.6% in 2028.

The NBS forecast assumes that the conflict ends relatively soon, without major damage to regional energy infrastructure, and that world energy prices fall more noticeably by year-end. Even so, the central bank said higher market energy prices would spill into the rest of the economy much as they did in 2022, leaving broader price pressures elevated and core inflation around 3% through the end of 2027.