European Central Bank Press conference comparison — 16 December 2021 vs 10 March 2022
This European Central Bank press conference comparison covers 16 December 2021 and 10 March 2022. Overall, the newer document was more hawkish. The ECB shifted hawkishly by setting a conditional end to asset purchases and removing the easing bias, but maintained data-dependent flexibility given war uncertainty. Next decision likely to confirm APP end in Q3 and signal rate hike later in 2022 if inflation stays elevated.
What changed
More hawkish. The ECB shifted hawkishly by setting a conditional end to asset purchases and removing the easing bias, but maintained data-dependent flexibility given war uncertainty. Next decision likely to confirm APP end in Q3 and signal rate hike later in 2022 if inflation stays elevated.
- Inflation — More hawkish. Current expresses stronger confidence in inflation stabilising at target and removes transitory language, shifting from prior's mixed assessment.
- Labour Market — More dovish. Current highlights lack of wage pressure and lower-than-expected wage increases, contrasting with prior's neutral-to-positive labour market outlook.
- Rate Path — More hawkish. Current sets a conditional end to APP in Q3 and removes easing bias, though 'some time after' lengthens the gap to rate hikes; overall forward guidance is more explicitly tightening-oriented.
- Balance Sheet — More hawkish. APP purchases are tapered with a definitive end-date, tightening balance sheet policy compared to prior's open-ended commitment.
Key wording
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.
In view of the current uncertainty, we need to maintain flexibility and optionality in the conduct of monetary policy.
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.
We expect net purchases to end shortly before we start raising the key ECB interest rates.
The labour market is improving, with more people having jobs and fewer in job retention schemes.
The Governing Council sees it as increasingly likely that inflation will stabilise at its two per cent target over the medium term.
The Russia-Ukraine war will have a material impact on economic activity and inflation through higher energy and commodity prices, the disruption of international commerce and weaker confidence.
Monthly net purchases under the APP will amount to €40 billion in April, €30 billion in May and €20 billion in June.
If the incoming data support the expectation that the medium-term inflation outlook will not weaken even after the end of our net asset purchases, the Governing Council will conclude net purchases under the APP in the third quarter.
we indicate very clearly in the monetary policy statement that I have just read that the Governing Council stands ready to revise, both in terms of timeline and in terms of volume, its purchases.
What we are not seeing so far and we are very, very much scrutinising the numbers, is wage pressure. When we look at the numbers for the fourth quarter of '21, the [negotiated] wage increases have actually been lower than the average of 2020.
Official documents
Background reading
Related
16 December 2021 press conference · 10 March 2022 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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