European Central Bank Press conference comparison — 25 July 2019 vs 12 December 2019
This European Central Bank press conference comparison covers 25 July 2019 and 12 December 2019. Overall, the newer document was more hawkish. The December 2019 statement holds rates and maintains the accommodative stance, but the slight reduction in downside risk language marks a modest hawkish tilt compared to July's overt easing bias. The ECB signals it is content to let the September package work through, with the next move dependent on whether the outlook deteriorates again.
What changed
More hawkish. The December 2019 statement holds rates and maintains the accommodative stance, but the slight reduction in downside risk language marks a modest hawkish tilt compared to July's overt easing bias. The ECB signals it is content to let the September package work through, with the next move dependent on whether the outlook deteriorates again.
- Inflation — Little changed. Inflation remains persistently below target with muted pressures, but the description is unchanged from the prior meeting, with no upgrade or downgrade in the assessment.
- Labour Market — Little changed. Labour market language is materially unchanged: both meetings note stronger cost pressures but delayed pass-through to inflation due to weak growth.
- Rate Path — More hawkish. The downside risks to growth are now described as 'somewhat less pronounced' compared to the prior meeting's 'remain tilted to the downside', a subtle but clear improvement that reduces the immediate urgency for further easing.
- Balance Sheet — Little changed. The balance sheet stance is reaffirmed with no new signals; the asset purchase programme is described as having its intended impact on long-end yields, and APP limits were not discussed.
Key wording
Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged.
We expect them to remain at their present or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to our aim over the medium term.
The Governing Council also underlined the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim. Accordingly, if the medium-term inflation outlook continues to fall short of our aim, the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim.
The risks surrounding the euro area growth outlook remain tilted to the downside, reflecting the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets.
While labour cost pressures have strengthened and broadened amid high levels of capacity utilisation and tightening labour markets, the pass-through of cost pressures to inflation is taking longer than previously anticipated.
All in all, the balance of risk was assessed to be on the downside, for the reasons that I've just mentioned
Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
they form a package. There were several components to that package and I think that the intention was for some of the measures, such as the interest rate, to actually have an impact on the short-term end of the yield curve, the forward guidance that was also part of the package that gives a clear calendar and induces an automatic adjustment, depending on the state of the economy.
Are some unconventional tools better than others? This is also something that we will be assessing as part of the strategic review because I think that we need to look in retrospect and assess what has been most helpful, what has worked best, what combination of them has worked best.
The risks surrounding the euro area growth outlook, related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets, remain tilted to the downside, but have become somewhat less pronounced.
While labour cost pressures have strengthened amid tighter labour markets, the weaker growth momentum is delaying their pass-through to inflation.
In view of the weakened economic outlook
Official documents
Background reading
Related
25 July 2019 press conference · 12 December 2019 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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