European Central Bank Statement comparison — 30 April 2020 vs 16 July 2020

This European Central Bank statement comparison covers 30 April 2020 and 16 July 2020. Overall, the newer document was more dovish. The ECB remains firmly accommodative, extending the PEPP horizon and reinvestment commitment while holding rates. The shift is dovish in terms of QE duration, signaling that the committee is not yet confident in recovery and will maintain ample support.

What changed

More dovish. The ECB remains firmly accommodative, extending the PEPP horizon and reinvestment commitment while holding rates. The shift is dovish in terms of QE duration, signaling that the committee is not yet confident in recovery and will maintain ample support.

Inflation — More dovish. The current statement introduces an explicit acknowledgment that pandemic has lowered inflation, justifying ongoing QE, a dovish shift from the prior statement which did not address inflation directly.
Labour Market — Little changed. No labour market passages in either document; labour market assessment remains neutral.
Rate Path — More dovish. The current statement extends PEPP purchases until June 2021 and commits to reinvestment until end-2022, a more accommodative timeline than the prior's 'at least until end of 2020' condition, while maintaining the same rate forward guidance allowing cuts, representing a dovish shift.
Balance Sheet — Little changed. The current statement replaces the prior's explicit readiness to increase PEPP size with a standard pledge to adjust all instruments, indicating a neutral stance on balance sheet expansion.

Key wording

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.

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.

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.

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.

net purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion, together with the purchases under the additional €120 billion temporary envelope until the end of the year.
rate path: Continued APP at steady pace alongside PEPP maintains significant QE footprint.

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.

16 July 2020

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: Rate decision unchanged, as expected; no surprise.

The Governing Council will continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,350 billion.
rate path: Full PEPP envelope maintained, signaling continued aggressive stimulus.

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: Explicitly leaves door open to rate cuts, tying normalization to robust inflation convergence.

The purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions.
rate path: Flexibility allows the ECB to address fragmentation risks and adjust as needed.

The Governing Council will conduct net asset purchases under the PEPP until at least the end of June 2021 and, in any case, until it judges that the coronavirus crisis phase is over.
rate path: Longer-than-expected horizon (June 2021) with open-ended conditionality, highly accommodative.

The Governing Council will reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2022.
rate path: Reinvestment commitment extends well beyond purchase period, maintaining accommodation.

Official documents

Background reading

30 April 2020 statement · 16 July 2020 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology