European Central Bank Press conference comparison — 4 June 2020 vs 10 September 2020

This European Central Bank press conference comparison covers 4 June 2020 and 10 September 2020. Overall, the newer document was more dovish. The ECB maintains its highly accommodative stance but introduces a new focus on the euro exchange rate as a downside risk to inflation. The next decision is likely to hold policy unchanged while monitoring the currency's impact, with a bias toward further easing if appreciation persists.

What changed

More dovish. The ECB maintains its highly accommodative stance but introduces a new focus on the euro exchange rate as a downside risk to inflation. The next decision is likely to hold policy unchanged while monitoring the currency's impact, with a bias toward further easing if appreciation persists.

Inflation — More dovish. Inflation outlook remains subdued, with the current document adding euro appreciation as a new downside pressure, reinforcing the need for accommodation.
Labour Market — Little changed. Prior document explicitly highlighted deteriorating labour conditions, while the current document omits direct labour market commentary, implying no additional concern or improvement.
Rate Path — More dovish. Forward guidance continues to stress low rates until inflation converges, with added vigilance on the euro exchange rate signaling readiness to ease further if needed.
Balance Sheet — Little changed. PEPP envelope is reaffirmed at €1,350 billion with no expansion, but full use is signaled, maintaining the accommodative stance without new action.

Key wording

4 June 2020

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.

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 until inflation close to 2%, providing long-term accommodation.

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.

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

According to Eurostat’s flash estimate, euro area annual HICP inflation decreased to 0.1% in May, down from 0.3% in April, mainly on account of lower energy price inflation.
inflation: Inflation plunging toward zero raises deflation concerns, reinforcing need for accommodation.

10 September 2020

In the near term price pressures will remain subdued owing to weak demand, lower wage pressures and the appreciation of the euro exchange rate, despite some upward price pressures related to supply constraints.
inflation: Weak inflation outlook, euro appreciation adds downside risk.

We will continue our purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,350 billion.
rate path: Reconfirms PEPP size, no change in stance.

We will 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: Rate path conditional on inflation convergence, signals prolonged low rates.

Overall, the balance of risks to the euro area growth outlook is seen to remain on the downside.
rate path: Downside risks from pandemic, implies continued accommodation.

Market-based indicators of longer-term inflation expectations have returned to their pre-pandemic levels, but still remain very subdued, while survey-based measures remain at low levels.
inflation: Inflation expectations still low, justifying further easing.

we are currently observing through the analysis that we do, we are observing negative pressure on the price level. That is partly attributable – largely attributable actually – to the appreciation of the euro.
inflation: Explicitly links euro appreciation to inflation undershoot, validating market concerns.

Official documents

Background reading

4 June 2020 press conference · 10 September 2020 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology