European Central Bank Statement comparison — 9 September 2021 vs 16 December 2021
This European Central Bank statement comparison covers 9 September 2021 and 16 December 2021. Overall, the newer document was more hawkish. The ECB statement shifts decisively hawkish on both rate path and balance sheet, accelerating the exit from pandemic-era easing by ending PEPP earlier and announcing APP taper, while maintaining long-run rate guidance unchanged. This signals a clear tightening trajectory for the next decision, with further reductions in asset purchases and a potential rate hike timeline brought forward.
What changed
More hawkish. The ECB statement shifts decisively hawkish on both rate path and balance sheet, accelerating the exit from pandemic-era easing by ending PEPP earlier and announcing APP taper, while maintaining long-run rate guidance unchanged. This signals a clear tightening trajectory for the next decision, with further reductions in asset purchases and a potential rate hike timeline brought forward.
- Inflation — Little changed. No direct inflation assessment in key passages; no shift detected.
- Labour Market — Little changed. No direct labour market assessment in key passages; no shift detected.
- Rate Path — More hawkish. Prior mixed signals (taper start but low-for-long guidance) shift to explicit PEPP end, APP taper schedule, and forward guidance tying APP end to rate hike, hinting at earlier lift-off.
- Balance Sheet — More hawkish. Prior flexible PEPP envelope and readiness to adjust shift to a definitive step-by-step reduction in asset purchases and early termination of PEPP.
Key wording
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.
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.
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.
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.
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.
The Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its two per cent target over the medium term.
In the first quarter of 2022, the Governing Council expects to conduct net asset purchases under the PEPP at a lower pace than in the previous quarter. It will discontinue net asset purchases under the PEPP at the end of March 2022.
The Governing Council expects net purchases to end shortly before it starts raising the key ECB interest rates.
In support of its symmetric 2% 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 2% 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 2% over the medium term. This may also imply a transitory period in which inflation is moderately above target.
In line with a step-by-step reduction in asset purchases and to ensure that the monetary policy stance remains consistent with inflation stabilising at its target over the medium term, the Governing Council decided on a monthly net purchase pace of €40 billion in the second quarter and €30 billion in the third quarter under the APP. From October 2022 onwards, the Governing Council will maintain net asset purchases under the APP at a monthly pace of €20 billion for as long as necessary to reinforce the accommodative impact of its policy rates.
The Governing Council judges that the progress on economic recovery and towards its medium-term inflation target permits a step-by-step reduction in the pace of its asset purchases over the coming quarters. But monetary accommodation is still needed for inflation to stabilise at the 2% inflation target over the medium term.
In view of the current uncertainty, the Governing Council needs to maintain flexibility and optionality in the conduct of monetary policy.
Official documents
Background reading
Related
9 September 2021 statement · 16 December 2021 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
The Cadence Brief
The one number that moved central bank pricing — delivered each weekday morning.