European Central Bank Press conference comparison — 23 January 2020 vs 12 March 2020

This European Central Bank press conference comparison covers 23 January 2020 and 12 March 2020. Overall, the newer document was more dovish. The ECB pivoted sharply from a neutral, institution-building posture to aggressive easing in response to the COVID-19 shock, with a substantial QE increase and dovish forward guidance. This signals a high probability of further easing if economic conditions deteriorate.

What changed

More dovish. The ECB pivoted sharply from a neutral, institution-building posture to aggressive easing in response to the COVID-19 shock, with a substantial QE increase and dovish forward guidance. This signals a high probability of further easing if economic conditions deteriorate.

Inflation — Little changed. Inflation forecast remains below target at 1.6% in 2022, but unchanged from prior assessment.
Labour Market — Little changed. Labour cost pressures are resilient but not translating to inflation; no material shift from prior.
Rate Path — More dovish. Forward guidance now includes explicit downside bias and readiness to cut or expand QE further, a clear shift from prior neutral stance.
Balance Sheet — More dovish. Unprecedented additional €120bn QE envelope and commitment to flexibility signal aggressive balance sheet expansion, a major shift from prior no action.

Key wording

23 January 2020

Rather it has sought – and is seeking – to fill the gaps in its economic and monetary union with institutional innovations like the banking union.
rate path: Signals ongoing commitment to completing EMU, which supports long-term stability.

Doing so would in turn set the stage for integration in more complex areas, like fiscal policies.
rate path: Hints at possible future fiscal integration, but no near-term policy change.

And the ECB, within its mandate, will play its role in upholding this spirit and tackling the shared challenges we face.
rate path: Affirms ECB's commitment to its mandate, but no new guidance on rates or QE.

12 March 2020

the spread of the coronavirus (COVID-19) has been a major shock to the growth prospects of the global and euro area economies and has heightened market volatility.
rate path: Acknowledges coronavirus as a 'major shock' – justifies massive policy response and opens door to more.

the Governing Council 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.
rate path: Rates on hold with explicit downside bias – signals readiness to cut if inflation fails to converge.

I remember saying when my predecessor and friend, President Draghi, left, and when I had interviews before the European Parliament, that I would hope that I would never have to do whatever it takes. What is good about our today's deliberations is that there was rallying support around the table to use all the tools available and to consider adjusting our instruments going forward in order to target those risks that we see as threats to stability in the euro area.
rate path: Signals open-ended tool use and willingness to act again, though stops short of 'whatever it takes'.

While labour cost pressures have so far remained resilient amid tighter labour markets, the weaker growth momentum is delaying their pass-through to inflation.
labour market: Labour resilience noted but not translating to inflation, indicating muted underlying pressures.

we still see inflation in 2022 at or about 1.6%, as will be published later on.
inflation: Inflation forecast below target but close, suggesting no immediate urgency for more easing.

Official documents

Background reading

23 January 2020 press conference · 12 March 2020 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology