European Central Bank Press conference comparison — 26 October 2023 vs 25 January 2024

This European Central Bank press conference comparison covers 26 October 2023 and 25 January 2024. Overall, the newer document was more dovish. The ECB holds rates steady while softening its inflation rhetoric and acknowledging growth risks, but firmly pushing back against rate cut expectations. The net signal is a cautious hold with a slight dovish tilt on inflation, suggesting the next decision will depend on incoming data, with no imminent change.

What changed

More dovish. The ECB holds rates steady while softening its inflation rhetoric and acknowledging growth risks, but firmly pushing back against rate cut expectations. The net signal is a cautious hold with a slight dovish tilt on inflation, suggesting the next decision will depend on incoming data, with no imminent change.

Inflation — More dovish. Inflation assessment shifts from persistently high and upside risks to declining underlying inflation and progress on disinflation via profit absorption.
Labour Market — Little changed. Labour market introduced with mixed signals: robust employment and lowest unemployment (hawkish) but slowing wage growth (dovish); no prior baseline to compare.
Rate Path — Little changed. Maintains hawkish forward guidance ('premature to discuss cuts', 'sufficiently long duration') but adds acknowledgement of growth weakness and declining core inflation, balancing the stance.
Balance Sheet — Little changed. No balance sheet passages in current document; prior mention of yield correction risk is dropped, implying no active concern.

Key wording

26 October 2023

Inflation is still expected to stay too high for too long, and domestic price pressures remain strong.
inflation: Reiterates persistent inflation, justifying restrictive stance.

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. Our future decisions will ensure that our policy rates will be set at sufficiently restrictive levels for as long as necessary.
rate path: Rates seen as sufficiently restrictive; signals prolonged high rates.

Upside risks to inflation could come from higher energy and food costs. The heightened geopolitical tensions could drive up energy prices in the near term, while making the medium-term outlook more uncertain.
inflation: Highlights upside inflation risks from geopolitics.

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: Hints at extended hold; no cuts on horizon.

Even having a discussion on a cut is totally premature.
rate path: Explicit pushback against rate cut expectations.

But be under no doubt, our determination is intact and our determination to bring inflation to 2% in the medium term is absolutely the same if not reinforced by the proximity of the destination.
rate path: Strong commitment to inflation target, signalling willingness to act if needed.

25 January 2024

Almost all measures of underlying inflation declined further in December.
inflation: Core inflation falling supports case for eventual rate cuts.

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: Hints at prolonged maintenance of high rates despite market expectations of cuts.

I’ll remind you that the baseline we had was that wage increases would gradually over the course of time be absorbed by a gradual reduction of profit unit, and that’s exactly what we are seeing.
inflation: Disinflation via profit absorption is unfolding as expected, supporting eventual cuts.

Upside risks to inflation include the heightened geopolitical tensions, especially in the Middle East, which could push energy prices and freight costs higher in the near term and hamper global trade. By contrast, inflation may surprise on the downside if monetary policy dampens demand by more than expected.
rate path: Balanced risks to inflation with geopolitical upside and demand downside.

First of all, the consensus around the table of the Governing Council was that it was premature to discuss rate cuts.
rate path: Rate cuts not on the table yet; reinforces data-dependent wait-and-see.

if the conflict in that region was to develop further, clearly that would be an additional risk, whether it’s a question of the disruption of shipping that we alluded to or the price of energy and commodities at large.
rate path: Geopolitical risk could reignite inflation and delay rate cuts.

Official documents

Background reading

26 October 2023 press conference · 25 January 2024 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology