European Central Bank Statement comparison — 12 December 2019 vs 30 April 2020

This European Central Bank statement comparison covers 12 December 2019 and 30 April 2020. Overall, the newer document was more dovish. The ECB delivered a substantial package of easing measures in April 2020, including lower TLTRO rates, new PELTROs, and the launch of PEPP, while keeping its existing forward guidance unchanged. This represents a clear dovish shift, with the central bank signalling a willingness to do more as needed to support the economy during the coronavirus crisis.

What changed

More dovish. The ECB delivered a substantial package of easing measures in April 2020, including lower TLTRO rates, new PELTROs, and the launch of PEPP, while keeping its existing forward guidance unchanged. This represents a clear dovish shift, with the central bank signalling a willingness to do more as needed to support the economy during the coronavirus crisis.

Inflation — Little changed. No key passage directly addresses inflation; the assessment is unchanged between documents.
Labour Market — Little changed. No key passage directly addresses labour market; no material shift in framing.
Rate Path — More dovish. Policy actions introduced further easing via TLTRO III rate cut and new PELTROs, while the forward guidance remains open-ended and dovish, implying rates on hold or lower for an extended period.
Balance Sheet — More dovish. Balance sheet significantly expanded with the addition of PEPP alongside continued APP at €20bn/month, plus new PELTROs, signalling a strong quantitative easing response to the pandemic.

Key wording

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.

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.

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.

30 April 2020

the Governing Council decided to reduce the interest rate on TLTRO III operations during the period from June 2020 to June 2021 to 50 basis points below the average interest rate on the Eurosystem’s main refinancing operations prevailing over the same period. Moreover, for counterparties whose eligible net lending reaches the lending performance threshold, the interest rate over the period from June 2020 to June 2021 will now be 50 basis points below the average deposit facility rate prevailing over the same period.
rate path: Substantial further easing of TLTRO III terms; effective rate can go as low as -1% for banks meeting lending thresholds.

These purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions.
rate path: Flexibility allows ECB to adjust allocation as needed, key for market expectations.

A new series of non-targeted pandemic emergency longer-term refinancing operations (PELTROs) will be conducted to support liquidity conditions in the euro area financial system and contribute to preserving the smooth functioning of money markets by providing an effective liquidity backstop. They will be carried out as fixed rate tender procedures with full allotment, with an interest rate that is 25 basis points below the average rate on the main refinancing operations prevailing over the life of each PELTRO.
rate path: New liquidity backstop at negative rates reinforces accommodative stance.

The Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over, but in any case until the end of this year.
rate path: Sets minimum duration for PEPP, with open-ended condition on crisis phase.

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: Rate forward guidance conditional on inflation convergence; explicitly allows for further rate cuts.

Official documents

Background reading

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