European Central Bank Statement comparison — 10 June 2021 vs 22 July 2021

This European Central Bank statement comparison covers 10 June 2021 and 22 July 2021. Overall, the newer document was more dovish. The ECB’s July statement delivers a dovish shift by revising forward guidance to allow inflation to overshoot its target, signalling a more persistent accommodative stance. The next decision likely to maintain easy policy, with rate hikes deferred well into the future.

What changed

More dovish. The ECB’s July statement delivers a dovish shift by revising forward guidance to allow inflation to overshoot its target, signalling a more persistent accommodative stance. The next decision likely to maintain easy policy, with rate hikes deferred well into the future.

Inflation — More dovish. Inflation assessment added: 'medium-term outlook for inflation is still well below the target,' reinforcing dovish stance.
Labour Market — Little changed. No labour market references in either document; no shift.
Rate Path — More dovish. Forward guidance revised to require inflation reaching 2% well ahead of projection horizon, accepting overshoot—a more accommodative commitment than prior guidance that aimed for inflation just below 2%.
Balance Sheet — Little changed. PEPP purchase pace and envelope flexibility language unchanged; no directional shift.

Key wording

10 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.
rate path: Allows for rates to be cut further; conditions for lift-off are stringent, signalling prolonged accommodation.

Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council expects net purchases under the PEPP over the coming quarter to continue to be conducted at a significantly higher pace than during the first months of the year.
rate path: Maintains elevated PEPP pace, reinforcing accommodative stance.

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: Highlights flexibility; PEPP envelope may not be fully used but can be increased if needed.

Net purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion.
rate path: APP unchanged; no taper signal.

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: Reiterates option to ease or tighten as needed; no directional bias.

22 July 2021

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 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.

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.

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

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