European Central Bank Press conference comparison — 15 June 2023 vs 27 July 2023
This European Central Bank press conference comparison covers 15 June 2023 and 27 July 2023. Overall, the newer document was more dovish. The July meeting delivered a 25bp hike but pivoted from hawkish forward guidance to a data-dependent, meeting-by-meeting stance, leaving September open. Labour market de-emphasis and balance sheet dovishness suggest the ECB is preparing for a potential pause, while inflation remains the key uncertainty.
What changed
More dovish. The July meeting delivered a 25bp hike but pivoted from hawkish forward guidance to a data-dependent, meeting-by-meeting stance, leaving September open. Labour market de-emphasis and balance sheet dovishness suggest the ECB is preparing for a potential pause, while inflation remains the key uncertainty.
- Inflation — Little changed. Inflation language remains hawkish with commitment to 2% target, but the addition of 'continues to decline' and a dovish note about no wage-price spiral softens the tone slightly.
- Labour Market — More dovish. Labour market is entirely absent from current key passages, whereas prior flagged tightness and wage pressures as key inflation drivers; this omission represents a dovish shift.
- Rate Path — Little changed. Prior gave explicit July hike guidance, while current keeps rates data-dependent with open options for September, implying a less predetermined path.
- Balance Sheet — More dovish. Prior highlighted active balance sheet reduction (TLTRO, APP run-off), but current focuses on strong transmission slowing credit, reducing the need for further tightening.
Key wording
Inflation has been coming down but is projected to remain too high for too long.
The Governing Council therefore today decided to raise the three key ECB interest rates by 25 basis points
Our future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our two per cent medium-term target and will be kept at those levels for as long as necessary.
The labour market remains a source of strength. Almost a million new jobs were added in the first quarter of the year and the unemployment rate stood at its historical low of 6.5 per cent in April.
Upside risks to inflation include potential renewed upward pressures on the costs of energy and food, also related to Russia’s war against Ukraine. A lasting rise in inflation expectations above our target, or higher than anticipated increases in wages or profit margins, could also drive inflation higher, including over the medium term. Recent wage agreements in a number of countries have added to the upside risks to inflation.
These higher borrowing rates, together with tighter credit supply conditions and lower loan demand, have further weakened credit dynamics.
Inflation continues to decline but is still expected to remain too high for too long.
Our future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our two per cent medium-term target.
Our future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our two per cent medium-term target. We will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
Upside risks to inflation include potential renewed upward pressures on the costs of energy and food, also related to Russia's unilateral withdrawal from the Black Sea Grain Initiative.
we are definitely seeing monetary policy being transmitted and being transmitted strongly. That’s obviously the case for the first leg and it is now also beginning to be the case in the second one.
we might hike and we might hold, and what is decided in September is not definitive.
Official documents
Background reading
Related
15 June 2023 press conference · 27 July 2023 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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