European Central Bank Statement comparison — 7 March 2019 vs 6 June 2019

This European Central Bank statement comparison covers 7 March 2019 and 6 June 2019. Overall, the newer document was more dovish. The ECB further extended rate guidance and improved TLTRO III pricing, signaling a more accommodative stance. The next decision is likely to maintain or increase accommodation if inflation remains subdued.

What changed

More dovish. The ECB further extended rate guidance and improved TLTRO III pricing, signaling a more accommodative stance. The next decision is likely to maintain or increase accommodation if inflation remains subdued.

Inflation — Little changed. Inflation conditionality wording unchanged from prior; both statements emphasize continued sustained convergence to below but close to 2%.
Labour Market — Little changed. No labour market passages in either document; no shift to assess.
Rate Path — More dovish. Forward guidance extended from 'at least through end of 2019' to 'at least through first half of 2020', and TLTRO III pricing reduced to 10 bps above MRO with a floor near the deposit rate.
Balance Sheet — More dovish. Reinvestment commitment unchanged, but TLTRO III terms became more favorable, effectively easing balance sheet conditions.

Key wording

7 March 2019

The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.
rate path: Confirms no change in key rates, in line with expectations.

The Governing Council now expects the key ECB interest rates to remain at their present levels at least through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.
rate path: Extends rate guidance beyond first half 2019; conditional on inflation convergence.

The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
rate path: Reinvestment commitment extends beyond first rate hike, ensuring continued accommodation.

A new series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched, starting in September 2019 and ending in March 2021, each with a maturity of two years.
rate path: New TLTRO series provides cheap funding to banks, supporting lending.

Under TLTRO-III, counterparties will be entitled to borrow up to 30% of the stock of eligible loans as at 28 February 2019 at a rate indexed to the interest rate on the main refinancing operations over the life of each operation.
rate path: Details of TLTRO-III terms; borrowing limit and pricing indexed to MRO rate.

Like the outstanding TLTRO programme, TLTRO-III will feature built-in incentives for credit conditions to remain favourable.
rate path: Continued incentives for bank lending, supporting monetary transmission.

6 June 2019

The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council now expects the key ECB interest rates to remain at their present levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.
rate path: Rates on hold and forward guidance extended by six months, signaling prolonged accommodation.

The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
rate path: Reinvestment commitment extended beyond first rate hike, supporting balance sheet and liquidity.

Regarding the modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III), the Governing Council decided that the interest rate in each operation will be set at a level that is 10 basis points above the average rate applied in the Eurosystem’s main refinancing operations over the life of the respective TLTRO. For banks whose eligible net lending exceeds a benchmark, the rate applied in TLTRO III will be lower and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation plus 10 basis points.
rate path: TLTRO III pricing is more favorable than expected, with a floor near deposit rate, incentivizing bank lending.

and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.
inflation: Conditionality on inflation convergence remains unchanged, but emphasis on sustained convergence reinforces dovish patience.

Official documents

Background reading

7 March 2019 statement · 6 June 2019 statement · Earlier meeting · Later meeting · Next comparison · Methodology