European Central Bank Press conference comparison — 26 October 2023 vs 14 December 2023
This European Central Bank press conference comparison covers 26 October 2023 and 14 December 2023. Overall, the newer document was more dovish. The December 2023 statement holds rates but tightens via balance sheet while softening inflation and rate path rhetoric. The next decision is likely a hold, with focus on inflation and growth data.
What changed
More dovish. The December 2023 statement holds rates but tightens via balance sheet while softening inflation and rate path rhetoric. The next decision is likely a hold, with focus on inflation and growth data.
- Inflation — More dovish. Inflation language softened from 'too high for too long' to acknowledging near-term pick-up but also downside risks, reducing hawkish tilt.
- Labour Market — Little changed. No labour market passages in either document; no change.
- Rate Path — More dovish. Forward guidance remains restrictive but drops explicit possibility of further hikes and adds downside risks to growth, shifting to a more data-dependent hold.
- Balance Sheet — More hawkish. PEPP reinvestment taper announced, a tightening action absent from prior document.
Key wording
Inflation is still expected to stay too high for too long, and domestic price pressures remain strong.
At the same time, inflation dropped markedly in September, including due to strong base effects, and most measures of underlying inflation have continued to ease.
Upside risks to inflation could come from higher energy and food costs.
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.
Even having a discussion on a cut is totally premature.
the assessment by our staff is that there is still more in the pipeline and more to come to affect the real economy. And the assumption is that it will continue to unfold throughout the end of 2023 and first quarter of 2024.
While inflation has dropped in recent months, it is likely to pick up again temporarily in the near term.
given a certain resistance of domestic inflation and the risk of second-round effects that we absolutely want to avoid
if that is confirmed, it would mean that the hypotheticals that we had in our previous forecast and that we have for this forecast in December – which was that markups would be reduced in order to absorb increased wages by way of catch-up or otherwise – that that is actually taking place, which would be really good news for inflation purposes.
The risks to economic growth remain tilted to the downside.
By contrast, inflation may surprise on the downside if monetary policy dampens demand by more than expected or the economic environment in the rest of the world worsens unexpectedly, potentially owing in part to the recent rise in geopolitical risks.
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.
Official documents
Background reading
Related
26 October 2023 press conference · 14 December 2023 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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