European Central Bank Press conference comparison — 14 September 2023 vs 14 December 2023

This European Central Bank press conference comparison covers 14 September 2023 and 14 December 2023. Overall, the newer document was more dovish. The ECB held rates unchanged, marking a peak in the hiking cycle, while starting balance sheet normalization via PEPP taper. The inflation assessment softened slightly, but the committee pushed back against rate cut expectations, signalling a prolonged hold at current levels.

What changed

More dovish. The ECB held rates unchanged, marking a peak in the hiking cycle, while starting balance sheet normalization via PEPP taper. The inflation assessment softened slightly, but the committee pushed back against rate cut expectations, signalling a prolonged hold at current levels.

Inflation — More dovish. Inflation assessment softened: prior stressed persistent elevated inflation and upside risks, while current acknowledges progress and downside risks, though still cautious on domestic persistence.
Labour Market — More dovish. Prior highlighted strong labour market and wage growth as hawkish risk; current omits labour market discussion, removing that hawkish signal.
Rate Path — More dovish. Action shifted from a 25bp hike to a hold, and forward guidance on rate cuts was explicitly rejected, but the net effect is an end to the tightening cycle.
Balance Sheet — More hawkish. Prior had no balance sheet signal; current announces PEPP reinvestment reduction and eventual discontinuation, tightening quantitative policy.

Key wording

14 September 2023

Inflation continues to decline but is still expected to remain too high for too long.
inflation: Inflation still too high, justifying further action.

In order to reinforce progress towards our target, the Governing Council today decided to raise the three key ECB interest rates by 25 basis points.
rate path: Rate hike of 25bp, confirming tightening bias.

the Governing Council today decided to raise the three key ECB interest rates by 25 basis points.
rate path: 25bp hike confirms tightening, but markets are more focused on the end of the cycle.

the Governing Council today decided to raise the three key ECB interest rates by 25 basis points
rate path: Confirms the 25 bp hike, the main policy decision.

Based on our current assessment, we consider that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.
rate path: Signals rates at or near peak, but need to keep them high for long.

Based on our current assessment, we consider that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target. Our future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary.
rate path: Signals rates may be at peak but need to stay high for long; conditionality on data.

14 December 2023

While inflation has dropped in recent months, it is likely to pick up again temporarily in the near term.
inflation: Acknowledges near-term bump but reaffirms disinflation trend.

The Governing Council today decided to keep the three key ECB interest rates unchanged.
rate path: Rate hold as expected, no change.

The Governing Council intends to reduce the PEPP portfolio over the second half of 2024 and to discontinue its reinvestments under the PEPP at the end of 2024.
rate path: Balance sheet normalization via PEPP taper adds to tightening, consistent with maintaining restrictiveness.

Everybody was fine with stopping the reinvestments at the end of 2024. Some would have liked a slightly different tapering, starting a little earlier, starting later.
rate path: PEPP reinvestment taper decision, with mild dissent on timing.

Based on our current assessment, we consider that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal.
rate path: Signals rates are at peak, focus on duration rather than further hikes.

Based on our current assessment, we consider that rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.
rate path: Signals rates will stay high for an extended period, reinforcing tightening bias.

Official documents

Background reading

14 September 2023 press conference · 14 December 2023 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology