European Central Bank Press conference comparison — 9 September 2021 vs 16 December 2021
This European Central Bank press conference comparison covers 9 September 2021 and 16 December 2021. Overall, the newer document was more hawkish. The ECB's December 2021 statement signals a cautious shift: it confirms the end of PEPP net purchases in March 2022 and acknowledges higher inflation, but keeps rates on hold and increases APP to smooth the transition. The next decision is likely to maintain accommodation while gradually winding down emergency measures, with rate hikes still distant.
What changed
More hawkish. The ECB's December 2021 statement signals a cautious shift: it confirms the end of PEPP net purchases in March 2022 and acknowledges higher inflation, but keeps rates on hold and increases APP to smooth the transition. The next decision is likely to maintain accommodation while gradually winding down emergency measures, with rate hikes still distant.
- Inflation — More hawkish. Inflation assessment shifted from predominantly transitory and dovish to acknowledging higher and more persistent inflation, with the November figure at 4.9% and forecasts above 2% for most of 2022.
- Labour Market — Little changed. Labour market characterization remained broadly unchanged, improving with gradual wage pressures expected.
- Rate Path — Little changed. Rate path is mixed: PEPP net purchases are set to end in March 2022 (hawkish) but rate hikes are ruled out for 2022 (dovish), resulting in a neutral overall stance.
- Balance Sheet — More hawkish. Risk balance tilted slightly hawkish as the statement highlights upside risks from wage and capacity pressures that could lead to higher inflation.
Key wording
The current increase in inflation is expected to be largely temporary and underlying price pressures are building up only slowly.
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.
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.
The labour market is also improving rapidly, which holds out the prospect of higher incomes and greater spending.
We see the risks to the economic outlook as broadly balanced.
However, many firms and households have taken on more debt during the pandemic. A deterioration in the economic outlook could threaten their financial health.
Inflation has risen sharply owing to the surge in energy prices, and also because demand is outpacing constrained supply in some sectors. Inflation is expected to remain elevated in the near term, but should ease in the course of next year. The inflation outlook has been revised up, but inflation is still projected to settle below our two per cent target over the projection horizon.
First, in the first quarter of 2022, we expect to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) at a lower pace than in the previous quarter. We will discontinue net asset purchases under the PEPP at the end of March 2022.
Net purchases under the PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic.
The labour market is improving, with more people having jobs and fewer in job retention schemes.
In view of the current uncertainty, we need to maintain flexibility and optionality in the conduct of monetary policy.
If price pressures feed through into higher than anticipated wage rises or the economy returns more quickly to full capacity, inflation could turn out to be higher.
Official documents
Background reading
Related
9 September 2021 press conference · 16 December 2021 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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