European Central Bank Statement comparison — 11 March 2021 vs 22 July 2021

This European Central Bank statement comparison covers 11 March 2021 and 22 July 2021. Overall, the newer document was more dovish. The current statement introduces a more dovish forward guidance on rates and acknowledges inflation below target, while the prior already had accommodative QE. The overall direction is a dovish tilt, signalling that the ECB is reinforcing commitment to accommodation and may be opening the door to future rate cuts if inflation remains weak.

What changed

More dovish. The current statement introduces a more dovish forward guidance on rates and acknowledges inflation below target, while the prior already had accommodative QE. The overall direction is a dovish tilt, signalling that the ECB is reinforcing commitment to accommodation and may be opening the door to future rate cuts if inflation remains weak.

Inflation — More dovish. Current statement explicitly notes inflation well below target, reinforcing the need for accommodative policy, while prior made no direct inflation assessment.
Labour Market — Little changed. Neither statement addresses labour market conditions; no shift in stance.
Rate Path — More dovish. Forward guidance revised to explicitly require inflation reaching 2% well before forecast horizon end, a more accommodative condition than the prior robust convergence language, and PEPP purchases remain elevated.
Balance Sheet — Little changed. Both statements maintain elevated PEPP purchases and envelope flexibility; no material change in balance sheet stance.

Key wording

11 March 2021

The Governing Council expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year.
rate path: Signals acceleration of QE to counter recent tightening of financing conditions.

If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.
rate path: Conditionality on PEPP envelope size gives flexibility to adjust as needed.

Net purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion.
rate path: APP kept unchanged, consistent with previous guidance.

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 to policy rates, as widely 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: Rate hike condition remains distant, reinforcing accommodative stance.

The Governing Council stands 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.
rate path: Reaffirms commitment to act if inflation undershoots, but no immediate action.

22 July 2021

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: Rates on hold as widely expected.

In these conditions, the Governing Council today revised its forward guidance on interest rates. It did so to underline its commitment to maintain a persistently accommodative monetary policy stance to meet its inflation target.
rate path: Explicit commitment to persistent accommodation via forward guidance revision.

the Governing Council continues to expect purchases under the PEPP over the current quarter to be conducted at a significantly higher pace than during the first months of the year.
rate path: Sustains elevated PEPP purchases, reinforcing dovish stance.

the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.
rate path: New guidance lowers the bar for rate hikes; inflation must be sustainably at 2% well before forecast horizon ends, accepting overshoot.

If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.
rate path: PEPP flexibility allows adjustment either way, but emphasis on maintaining favourable conditions.

the medium-term outlook for inflation is still well below the Governing Council’s target.
inflation: Confirms inflation remains weak, supporting accommodative policy.

Official documents

Background reading

11 March 2021 statement · 22 July 2021 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology