European Central Bank Press conference comparison — 27 October 2022 vs 16 March 2023

This European Central Bank press conference comparison covers 27 October 2022 and 16 March 2023. Overall, the newer document was more dovish. The ECB delivered a smaller 50bp rate hike and acknowledged financial stability risks, marking a dovish shift from the prior aggressive tightening stance. The next decision is highly data-dependent and conditional on financial tensions abating, suggesting a slower or paused hiking cycle.

What changed

More dovish. The ECB delivered a smaller 50bp rate hike and acknowledged financial stability risks, marking a dovish shift from the prior aggressive tightening stance. The next decision is highly data-dependent and conditional on financial tensions abating, suggesting a slower or paused hiking cycle.

Inflation — Little changed. Inflation is still described as too high for too long with underlying components rising, similar to prior hawkish language; no material softening or strengthening.
Labour Market — More dovish. Prior highlighted labour market strength; current document omits labour market references, removing a hawkish supporting argument.
Rate Path — More dovish. The 50bp hike is smaller than the prior 75bp, and forward guidance is heavily caveated with financial stability risks, data-dependence, and dissenting members wanting to wait, implying a slower pace ahead.
Balance Sheet — More dovish. Balance sheet language shifted from actively tightening TLTRO terms and planning APP reduction to pledging readiness to respond to market tensions and reaffirming no change to QT pace.

Key wording

27 October 2022

The Governing Council today decided to raise the three key ECB interest rates by 75 basis points.
rate path: 75bp hike, third consecutive, signals ongoing tightening.

We took today’s decision, and expect to raise interest rates further, to ensure the timely return of inflation to our two per cent medium-term inflation target. We will base the future policy rate path on the evolving outlook for inflation and the economy, following our meeting-by-meeting approach.
rate path: Explicit expectation of further hikes, but meeting-by-meeting leaves flexibility.

Inflation remains far too high and will stay above our target for an extended period.
inflation: Inflation elevated and persistent, justifying aggressive tightening.

Our monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations.
inflation: Explicit risk of persistent upward shift in inflation expectations.

The Governing Council also decided to change the terms and conditions of the third series of targeted longer-term refinancing operations (TLTRO III). We therefore decided to adjust the interest rates applicable to TLTRO III from 23 November 2022 and to offer banks additional voluntary early repayment dates.
balance sheet: TLTRO III terms tightened, encourages early repayment, reduces monetary accommodation.

What we have done with the decision taken today is making yet more progress in withdrawing the accommodative [policy] and [the] support to demand that was made available. So we have made substantial progress in withdrawing that. Have we completed the job? Have we finished the normalisation of our monetary policy as we have called it? No. There is still ground to cover.
rate path: Confirms further rate hikes despite progress; normalization not complete.

16 March 2023

Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points, in line with our determination to ensure the timely return of inflation to our two per cent medium-term target.
rate path: 50bp hike confirms continued tightening despite financial tensions.

the Governing Council today decided to increase the three key ECB interest rates by 50 basis points
rate path: Rate hike signals continued tightening despite banking stress.

Inflation is projected to remain too high for too long.
inflation: High-for-long inflation view justifies the rate hike.

Moreover, many firms were able to raise their profit margins in sectors faced with constrained supply and resurgent demand.
inflation: Acknowledges profit margins as inflation driver, moderates wage narrative.

We are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability in the euro area.
balance sheet: Pledge to address financial stability risks flags potential easing.

The elevated level of uncertainty reinforces the importance of a data-dependent approach to our policy rate decisions, which will be determined by our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.
rate path: Data-dependent guidance leaves optionality for future moves.

Official documents

Background reading

27 October 2022 press conference · 16 March 2023 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology