European Central Bank Statement comparison — 22 July 2021 vs 9 September 2021

This European Central Bank statement comparison covers 22 July 2021 and 9 September 2021. Overall, the newer document was more hawkish. The ECB delivered a cautious hawkish tilt by announcing a moderate reduction in PEPP purchase pace, the first explicit taper, while reaffirming its low-for-long rate guidance. The next decision likely holds rates steady but could further calibrate purchase pace depending on inflation and financing conditions.

What changed

More hawkish. The ECB delivered a cautious hawkish tilt by announcing a moderate reduction in PEPP purchase pace, the first explicit taper, while reaffirming its low-for-long rate guidance. The next decision likely holds rates steady but could further calibrate purchase pace depending on inflation and financing conditions.

Inflation — Little changed. Inflation assessment not updated in current document; prior's 'well below target' remains the last guidance.
Labour Market — Little changed. No labour market passages in either document; no shift.
Rate Path — More hawkish. First explicit taper of PEPP (moderately lower pace) marks a hawkish turn on asset purchases, though rate forward guidance remains persistently accommodative.
Balance Sheet — Little changed. PEPP flexibility language unchanged; standard readiness to adjust maintains neutral balance sheet stance.

Key wording

22 July 2021

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

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 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.

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.

9 September 2021

In support of its symmetric two per cent inflation target and in line with its monetary policy strategy, 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: Reiterates low-for-long rate guidance; tolerates temporary overshoot.

The Governing Council continues to expect monthly net asset purchases under the APP 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.
rate path: Links APP end to rate hike timing, reinforcing sequencing.

Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under the pandemic emergency purchase programme (PEPP) than in the previous two quarters.
rate path: First explicit taper of PEPP; signals reduced emergency support.

The Governing Council will continue to conduct net asset purchases under the PEPP with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over.
rate path: Reaffirms PEPP envelope and minimum horizon.

Official documents

Background reading

22 July 2021 statement · 9 September 2021 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology