European Central Bank Statement comparison — 23 January 2020 vs 12 March 2020
This European Central Bank statement comparison covers 23 January 2020 and 12 March 2020. Overall, the newer document was more dovish. The ECB maintains its key rates but delivers substantial additional easing through QE and TLTROs in response to COVID-19 risks, marking a clear dovish shift. For the next decision, this signals a strong accommodative stance and willingness to deploy further measures if economic conditions deteriorate.
What changed
More dovish. The ECB maintains its key rates but delivers substantial additional easing through QE and TLTROs in response to COVID-19 risks, marking a clear dovish shift. For the next decision, this signals a strong accommodative stance and willingness to deploy further measures if economic conditions deteriorate.
- Inflation — Little changed. No material change in inflation assessment; both documents reference the same inflation convergence condition in forward guidance.
- Labour Market — Little changed. Labour market not mentioned in either set of key passages; no shift.
- Rate Path — More dovish. Rates held unchanged but current document adds a temporary €120 billion QE envelope and cuts TLTRO III rates by 25bp, signalling increased accommodation beyond the prior guidance.
- Balance Sheet — More dovish. Current document expands asset purchases significantly with a new €120 billion envelope and introduces targeted longer-term operations, a clear dovish shift from prior steady APP pace.
Key wording
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.
The Governing Council will continue to make net purchases under its asset purchase programme (APP) at a monthly pace of €20 billion.
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.
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.
The Governing Council also decided to launch a review of the ECB’s monetary policy strategy.
the interest rate on these TLTRO III operations will be 25 basis points below the average rate applied in the Eurosystem’s main refinancing operations. For counterparties that maintain their levels of credit provision, the rate applied in these operations will be lower, and, over the period ending in June 2021, can be as low as 25 basis points below the average interest rate on the deposit facility.
A temporary envelope of additional net asset purchases of €120 billion will be added until the end of the year, ensuring a strong contribution from the private sector purchase programmes.
Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council 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.
Although the Governing Council does not see material signs of strains in money markets or liquidity shortages in the banking system, these operations will provide an effective backstop in case of need.
These operations will support bank lending to those affected most by the spread of the coronavirus, in particular small and medium-sized enterprises.
Official documents
Background reading
Related
23 January 2020 statement · 12 March 2020 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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