European Central Bank Press conference comparison — 10 March 2022 vs 21 July 2022
This European Central Bank press conference comparison covers 10 March 2022 and 21 July 2022. Overall, the newer document was more hawkish. The ECB shifted decisively hawkish from March to July 2022, moving from cautious normalization to aggressive rate hikes in response to surging inflation. The next decision is likely another rate hike, with data-dependent guidance and a focus on inflation risks.
What changed
More hawkish. The ECB shifted decisively hawkish from March to July 2022, moving from cautious normalization to aggressive rate hikes in response to surging inflation. The next decision is likely another rate hike, with data-dependent guidance and a focus on inflation risks.
- Inflation — More hawkish. Prior document noted confidence in 2% target and anchored expectations, while current document highlights broadening price pressures and overshoot, indicating a significant escalation in inflation concern.
- Labour Market — Little changed. Prior document cited lack of wage pressure as a dovish factor, but current document omits any labour market discussion, implying the topic is no longer a constraint on policy.
- Rate Path — More hawkish. Prior document leaned dovish with cautious tapering and flexible timing, while current document delivers a 50bp hike, signals further normalization, and removes forward guidance, marking a clear hawkish pivot.
- Balance Sheet — Little changed. Prior document involved gradual APP tapering, while current document introduces the TPI as a backstop but no active balance sheet tightening, leaving balance sheet policy unchanged.
Key wording
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.
The Governing Council sees it as increasingly likely that inflation will stabilise at its two per cent target over the medium term.
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.
Various measures of longer-term inflation expectations derived from financial markets and from surveys stand at around two per cent.
The risks to the economic outlook have increased substantially with the Russian invasion of Ukraine and are tilted to the downside.
The risks to the inflation outlook continue to be on the upside and have intensified, particularly in the short term.
Price pressures are spreading across more and more sectors, in part owing to the indirect impact of high energy costs across the whole economy.
We decided to raise the three key ECB interest rates by 50 basis points and approved the Transmission Protection Instrument (TPI).
At our upcoming meetings, further normalisation of interest rates will be appropriate. The frontloading today of the exit from negative interest rates allows us to make a transition to a meeting-by-meeting approach to our interest rate decisions.
inflation continues to be undesirably high and is expected to remain above our target for some time. The latest data indicate a slowdown in growth, clouding the outlook for the second half of 2022 and beyond.
We see downside risk to growth. We are seeing upside risk to inflation, particularly in the short-term, but spreading.
Official documents
Background reading
Related
10 March 2022 press conference · 21 July 2022 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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