European Central Bank Press conference comparison — 25 January 2024 vs 11 April 2024
This European Central Bank press conference comparison covers 25 January 2024 and 11 April 2024. Overall, the newer document was more hawkish. The ECB maintains rates unchanged but shifts forward guidance to explicitly condition a cut on further disinflation progress, a dovish pivot from the prior insistence that cuts were premature. However, sticky services inflation and geopolitical risks keep the overall tone cautious, suggesting a potential first cut in June if incoming data boosts confidence.
What changed
More hawkish. The ECB maintains rates unchanged but shifts forward guidance to explicitly condition a cut on further disinflation progress, a dovish pivot from the prior insistence that cuts were premature. However, sticky services inflation and geopolitical risks keep the overall tone cautious, suggesting a potential first cut in June if incoming data boosts confidence.
- Inflation — More hawkish. Prior emphasized broad-based decline in underlying inflation, while current highlights sticky services inflation at 4% for five months, signaling persistent domestic price pressures.
- Labour Market — Little changed. Labour market is not explicitly addressed in the current document, effectively maintaining the prior mixed assessment.
- Rate Path — More dovish. The prior repeatedly stated it was premature to discuss cuts, whereas current introduces explicit conditions for a rate cut and signals cuts may come before inflation fully reaches target.
- Balance Sheet — More hawkish. Prior balanced upside geopolitical risks with downside growth risks, while current focuses more on geopolitical upside risk to inflation with less emphasis on growth weakness.
Key wording
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.
The labour market has remained robust. The unemployment rate, at 6.4 per cent in November, has fallen back to its lowest level since the start of the euro.
Almost all measures of underlying inflation declined further in December.
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.
First of all, the consensus around the table of the Governing Council was that it was premature to discuss rate cuts.
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.
If our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase our confidence that inflation is converging to our target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction.
But domestic price pressures are strong and are keeping services price inflation high.
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 disrupt global trade.
I have said in the past that we are data dependent, we are not Fed dependent.
So declines in inflation, which we have observed so far, are not going to be linear, and we will have fluctuations around the current level, based on our projections, until it declines to our target in mid-2025.
inflation is expected to fluctuate around current levels in the coming months and to then decline to our target next year, owing to weaker growth in labour costs, the unfolding effect of our restrictive monetary policy, and the fading impact of the energy crisis and the pandemic.
Official documents
Background reading
Related
25 January 2024 press conference · 11 April 2024 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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