European Central Bank Statement comparison — 23 January 2020 vs 4 June 2020
This European Central Bank statement comparison covers 23 January 2020 and 4 June 2020. Overall, the newer document was more dovish. The ECB shifted from steady accommodation to aggressive crisis-fighting with a massive PEPP increase, signaling strong dovish bias. The next decision is likely to maintain or expand stimulus as needed.
What changed
More dovish. The ECB shifted from steady accommodation to aggressive crisis-fighting with a massive PEPP increase, signaling strong dovish bias. The next decision is likely to maintain or expand stimulus as needed.
- Inflation — More dovish. The prior document had no explicit inflation assessment, while the current highlights pandemic-related downward revision and uses it to justify increased stimulus, a clear dovish shift.
- Labour Market — Little changed. Both documents lack labour market commentary; no shift.
- Rate Path — More dovish. The prior maintained existing accommodation with steady rates and QE, while the current launches a massive PEPP expansion and extends purchases with open-ended crisis conditionality, a material dovish escalation.
- Balance Sheet — More dovish. The prior kept APP purchases at €20B/month, while the current increases PEPP by €600B to €1.35T and extends purchases until at least June 2021, a substantial dovish balance sheet expansion.
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 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.
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 envelope for the pandemic emergency purchase programme (PEPP) will be increased by €600 billion to a total of €1,350 billion.
In any case, the Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over.
The horizon for net purchases under the PEPP will be extended to at least the end of June 2021.
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.
The Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.
In response to the pandemic-related downward revision to inflation over the projection horizon, the PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households.
Official documents
Background reading
Related
23 January 2020 statement · 4 June 2020 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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