European Central Bank Press conference comparison — 22 July 2021 vs 9 September 2021
This European Central Bank press conference comparison covers 22 July 2021 and 9 September 2021. Overall, the newer document was more hawkish. The ECB's September decision to moderately lower the pace of PEPP purchases marks a hawkish shift from the July meeting, where policy was firmly accommodative. The next decision in December will be critical for the future of PEPP, with rate hikes still distant but tapering now underway.
What changed
More hawkish. The ECB's September decision to moderately lower the pace of PEPP purchases marks a hawkish shift from the July meeting, where policy was firmly accommodative. The next decision in December will be critical for the future of PEPP, with rate hikes still distant but tapering now underway.
- Inflation — Little changed. Both documents describe the current inflation rise as largely temporary and do not signal a change in the assessment of underlying price pressures.
- Labour Market — Little changed. The prior document had no explicit labour market assessment; the current document notes improvement but no policy implications, so no directional shift.
- Rate Path — More hawkish. The prior document committed to a high pace of PEPP purchases and outcome-based forward guidance; the current document reduces the pace of PEPP purchases, signalling a gradual withdrawal of emergency stimulus.
- Balance Sheet — More hawkish. Both documents see risks as broadly balanced, but the current document adds an upside inflation risk from supply bottlenecks, tilting the risk assessment slightly hawkish.
Key wording
the Governing Council expects the key ECB interest rates to remain at their present or lower levels until we see inflation reaching two per cent well ahead of the end of our projection horizon and durably for the rest of the projection horizon, and we judge that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.
The Governing Council expects the key ECB interest rates to remain at their present or lower levels until – and that's when it begins to be important – we see inflation reaching 2% well ahead of the end of our projection horizon.
we continue to expect purchases under the pandemic emergency purchase programme (PEPP) over the current quarter to be conducted at a significantly higher pace than during the first months of the year.
Inflation was 1.9 per cent in June. We expect inflation to increase further over the coming months and to decline again next year. The current increase is largely being driven by higher energy prices and by base effects from the sharp fall in oil prices at the start of the pandemic and the impact of the temporary VAT reduction in Germany last year. By early 2022, the impact of these factors should fade out as they fall out of the year-on-year inflation calculation.
Any worsening of the economy could therefore threaten their financial health, which could trickle through to the quality of banks’ balance sheets.
The current rise in inflation is expected to be largely temporary.
We stand ready to adjust all of our instruments, as appropriate, to ensure that inflation stabilises at our two per cent target over the medium term.
Our policy measures, including our revised forward guidance on the key ECB interest rates, are key to helping the economy shift to a sustained recovery and, ultimately, to bringing inflation to our two per cent target.
Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under the pandemic emergency purchase programme (PEPP) than in the previous two quarters.
The current increase in inflation is expected to be largely temporary and underlying price pressures are building up only slowly.
However, many firms and households have taken on more debt during the pandemic. A deterioration in the economic outlook could threaten their financial health.
The current rise in inflation is expected to be largely temporary and underlying price pressures will build up only gradually.
Official documents
Background reading
Related
22 July 2021 press conference · 9 September 2021 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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