European Central Bank Statement comparison — 25 July 2019 vs 12 December 2019

This European Central Bank statement comparison covers 25 July 2019 and 12 December 2019. Overall, the newer document was more dovish. The ECB holds rates unchanged in December 2019 and confirms the restart of QE, but tempers the explicit easing bias seen in July by replacing the time-bound forward guidance with a conditional inflation convergence criterion. The overall stance remains accommodative, with the next decision likely to maintain the current policy settings while monitoring the inflation outlook.

What changed

More dovish. The ECB holds rates unchanged in December 2019 and confirms the restart of QE, but tempers the explicit easing bias seen in July by replacing the time-bound forward guidance with a conditional inflation convergence criterion. The overall stance remains accommodative, with the next decision likely to maintain the current policy settings while monitoring the inflation outlook.

Inflation — Little changed. Inflation not explicitly discussed in the current document; the prior document's acknowledgment of persistent shortfall is not repeated, but the rate guidance remains conditional on inflation convergence, implying continued concern.
Labour Market — Little changed. No labour market language in either document; no shift.
Rate Path — More dovish. Both documents maintain a dovish stance with rates at present or lower levels, but the current document replaces the time-based horizon with a more conditional and open-ended inflation convergence condition, while dropping the explicit easing bias language ('determined to act', 'ready to adjust all instruments'), resulting in a slightly less emphatic dovish signal.
Balance Sheet — Little changed. Prior document signalled readiness to adjust all instruments including QE; current document confirms the restart of net purchases and reinforces open-ended reinvestment, representing a shift from signalling to action but no change in the overall accommodative stance.

Key wording

25 July 2019

At today’s meeting the Governing Council of the European Central Bank (ECB) decided that 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: No change in rates, as expected.

The Governing Council expects the key ECB interest rates to remain at their present or lower 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 its aim over the medium term.
rate path: Added 'or lower' and extended horizon, signaling possible rate cuts.

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, supporting accommodative conditions.

The Governing Council also underlined the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim.
inflation: Explicitly acknowledges persistent inflation shortfall, justifying accommodation.

Accordingly, if the medium-term inflation outlook continues to fall short of its aim, the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim.
rate path: Strong easing bias: condition for action is further shortfall.

It therefore stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.
rate path: Open commitment to use all tools, including rate cuts and QE.

12 December 2019

At today’s meeting the Governing Council of the European Central Bank (ECB) decided that 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 -0.50% respectively.
rate path: No change in rates, as expected.

The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
rate path: Open-ended guidance with 'or lower' and strict condition on inflation, implying rates on hold for an extended period.

The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.
rate path: QE is open-ended and tied to rate hikes, which are distant given inflation conditions.

The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP 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 well beyond first rate hike, ensuring sustained accommodation.

On 1 November net purchases were restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion.
rate path: Confirms ongoing QE at current pace.

Official documents

Background reading

25 July 2019 statement · 12 December 2019 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology