European Central Bank Press conference comparison — 30 April 2020 vs 4 June 2020

This European Central Bank press conference comparison covers 30 April 2020 and 4 June 2020. Overall, the newer document was more dovish. The ECB delivered substantial additional easing by expanding PEPP and extending its duration, while reaffirming low rate guidance amid a further deterioration in inflation and growth outlook. The next decision will likely maintain an accommodative stance, with further measures possible if conditions worsen.

What changed

More dovish. The ECB delivered substantial additional easing by expanding PEPP and extending its duration, while reaffirming low rate guidance amid a further deterioration in inflation and growth outlook. The next decision will likely maintain an accommodative stance, with further measures possible if conditions worsen.

Inflation — More dovish. Inflation outlook deteriorated further, with actual inflation at 0.1% and projections well below target, reinforcing the need for continued accommodation.
Labour Market — Little changed. Labour market rhetoric remains consistently dovish, describing sharp deterioration in both documents with no material rewording of the assessment.
Rate Path — More dovish. Forward guidance on rates maintained at present or lower levels, while the substantial PEPP expansion and extended reinvestment horizon signal a more accommodative stance.
Balance Sheet — More dovish. The PEPP envelope was increased by €600 billion to €1.35 trillion and the purchase horizon extended, representing a significant balance sheet expansion.

Key wording

30 April 2020

Survey indicators for consumer and business sentiment have plunged, suggesting a sharp contraction in economic growth and a profound deterioration in labour market conditions.
labour market: Plunging sentiment points to sharp contraction and severe labour market deterioration, supporting accommodative stance.

Inflation has declined as a result of the sharp fall in oil prices and slightly lower HICP inflation excluding energy and food.
inflation: Inflation declining due to oil collapse and weak core, reinforcing need for stimulus.

Accordingly, the Governing Council decided today to further ease the conditions on our targeted longer-term refinancing operations (TLTRO III).
rate path: TLTRO III rate cut by 50bp below deposit facility rate for banks meeting lending targets, directly easing credit conditions.

the severe risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the coronavirus pandemic.
rate path: Acknowledges severe risks to transmission and outlook, justifying aggressive easing and flexibility.

Given the highly uncertain duration of the pandemic, the likely extent and duration of the imminent recession and the subsequent recovery are difficult to predict.
rate path: Highlights extreme uncertainty, supporting cautious policy stance.

However, without pre-empting the forthcoming Eurosystem staff macroeconomic projections, which will be published in June, growth scenarios produced by ECB staff suggest that euro area GDP could fall by between 5% and 12% this year, followed by a recovery and normalisation of growth in subsequent years.
rate path: Wide GDP contraction range underscores downside risks, implying further easing may be needed.

4 June 2020

The latest economic indicators and survey results confirm a sharp contraction of the euro area economy and rapidly deteriorating labour market conditions.
labour market: Deteriorating labour market adds urgency for accommodative policy.

While headline inflation is suppressed by lower energy prices, price pressures are expected to remain subdued on account of the sharp decline in real GDP and the associated significant increase in economic slack.
inflation: Weak inflation outlook supports need for continued stimulus.

the Governing Council decided to increase the envelope for the pandemic emergency purchase programme (PEPP) by €600 billion to a total of €1,350 billion.
rate path: Substantial expansion of PEPP signals strong easing response to pandemic.

Overall, the Governing Council sees the balance of risks around the baseline projection to the downside.
rate path: Downside risks justify ongoing accommodative stance.

In response to the pandemic shock and the resulting downward pressure on inflation and the medium-term inflation outlook for the whole euro area, that's the response. Financial conditions for the whole euro area are significantly tighter.
rate path: Highlights downside risks and tight financial conditions, supporting easier policy.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is necessary for the robust convergence of inflation to levels that are below, but close to, 2% over the medium term.
rate path: Explicit commitment to ample accommodation until inflation sustainably approaches 2%.

Official documents

Background reading

30 April 2020 press conference · 4 June 2020 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology