European Central Bank Press conference comparison — 29 October 2020 vs 10 December 2020

This European Central Bank press conference comparison covers 29 October 2020 and 10 December 2020. Overall, the newer document was more dovish. The ECB delivered the comprehensive recalibration signalled in October, expanding PEPP by €500bn and extending its horizon while keeping rates lower-for-longer. The substantial easing package underscores the Governing Council's commitment to support the economy through the second wave, with a clear dovish bias for future meetings.

What changed

More dovish. The ECB delivered the comprehensive recalibration signalled in October, expanding PEPP by €500bn and extending its horizon while keeping rates lower-for-longer. The substantial easing package underscores the Governing Council's commitment to support the economy through the second wave, with a clear dovish bias for future meetings.

Inflation — Little changed. Inflation assessment remains dovish with persistent negative readings and weak demand, unchanged from prior meeting.
Labour Market — Little changed. Labour market language unchanged, still highlighting significant slack.
Rate Path — More dovish. Dovish shift as prior promises of recalibration are delivered with a PEPP expansion and extended lower-for-longer rate guidance.
Balance Sheet — More dovish. New explicit balance sheet easing measures (PEPP increase, TLTRO extension) represent a clear dovish shift from prior absence of such signals.

Key wording

29 October 2020

significant slack in labour and product markets
labour market: Weak labour market supports need for stimulus.

In the current environment of risks clearly tilted to the downside
rate path: Explicit downside risks justify potential easing.

On the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favourable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path.
rate path: Hints at future easing conditional on December projections.

On the basis of this updated assessment, the Governing Council will recalibrate its instruments as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favourable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path.
rate path: Explicit commitment to recalibrate all instruments in December, strongly dovish signal.

We decided to reconfirm our accommodative monetary policy stance.
rate path: No policy change, maintains current stance.

Headline inflation is likely to remain negative until early 2021.
inflation: Negative inflation justifies accommodative policy.

10 December 2020

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 per cent within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
rate path: Rates on hold with a bias to cut, conditional on inflation convergence.

s. We will also continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook. We therefore continue to stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our aim in a sustained manner, in line with our commitment to symmetry.
rate path: ECB signals readiness to adjust all instruments, keeping dovish bias.

We therefore continue to stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our aim in a sustained manner, in line with our commitment to symmetry.
rate path: Strong easing bias, signalling further action if needed.

Looking ahead, the news of prospective roll-outs of vaccines allows for greater confidence in the assumption of a gradual resolution of the health crisis. However, it will take time until widespread immunity is achieved, while further resurgences in infections, with challenges to public health and economic prospects, cannot be ruled out.
rate path: Vaccine news positive but risks remain from resurgence, balance of risks still tilted.

Inflation remains very low in the context of weak demand and significant slack in labour and product markets. Overall, the incoming data and our staff projections suggest a more pronounced near-term impact of the pandemic on the economy and a more protracted weakness in inflation than previously envisaged.
inflation: Inflation outlook deteriorated, justifying more stimulus.

Overall, the risks surrounding the euro area growth outlook remain tilted to the downside, but have become less pronounced.
rate path: Downside risks persist but are diminishing, key for assessing need for further easing.

Official documents

Background reading

29 October 2020 press conference · 10 December 2020 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology