European Central Bank Statement comparison — 8 September 2022 vs 15 December 2022

This European Central Bank statement comparison covers 8 September 2022 and 15 December 2022. Overall, the newer document was more hawkish. The ECB continues its tightening cycle with a 50bp hike and announces the start of QT, but the pace of rate hikes has slowed from the prior 75bp. This signals a persistent hawkish stance while acknowledging the need for a more gradual approach amid recession risks.

What changed

More hawkish. The ECB continues its tightening cycle with a 50bp hike and announces the start of QT, but the pace of rate hikes has slowed from the prior 75bp. This signals a persistent hawkish stance while acknowledging the need for a more gradual approach amid recession risks.

Inflation — More hawkish. Inflation is higher (10.0% vs 9.1%) and projections revised up significantly, reinforcing the hawkish inflation outlook.
Labour Market — Little changed. No dedicated labour market passage in current document; prior slowdown concerns are absent or downplayed in rate path context.
Rate Path — More hawkish. Rate hike continues (50bp vs prior 75bp) but forward guidance remains committed to further significant hikes at a steady pace, maintaining a hawkish stance.
Balance Sheet — More hawkish. Introduction of quantitative tightening starting March 2023 adds a new tightening dimension, absent in prior document.

Key wording

8 September 2022

The Governing Council today decided to raise the three key ECB interest rates by 75 basis points.
rate path: Largest single hike in ECB history, frontloading normalization.

This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target.
rate path: Emphasizes urgency to bring inflation back to target.

Based on its current assessment, over the next several meetings the Governing Council expects to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.
rate path: Explicit commitment to further rate hikes in coming meetings.

According to Eurostat’s flash estimate, inflation reached 9.1% in August.
inflation: Inflation far above target, justifying aggressive action.

inflation is now expected to average 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024.
inflation: Inflation projected above 2% even in 2024, warranting continued tightening.

After a rebound in the first half of 2022, recent data point to a substantial slowdown in euro area economic growth, with the economy expected to stagnate later in the year and in the first quarter of 2023.
labour market: Stagflationary backdrop complicates further tightening.

15 December 2022

The Governing Council today decided to raise the three key ECB interest rates by 50 basis points and, based on the substantial upward revision to the inflation outlook, expects to raise them further.
rate path: Rate hike decision and explicit link to higher inflation outlook signal ongoing tightening.

In particular, the Governing Council judges that interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target.
rate path: Clear guidance that rates need to rise 'significantly' at a 'steady pace', reinforcing hawkish stance.

Keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations.
rate path: Emphasis on guarding against inflation expectations drift justifies prolonged restrictive policy.

According to Eurostat’s flash estimate, inflation was 10.0% in November, slightly lower than the 10.6% recorded in October. The decline resulted mainly from lower energy price inflation. Food price inflation and underlying price pressures across the economy have strengthened and will persist for some time.
inflation: Underlying pressures strengthening and persistent, indicating inflation is broad-based and sticky.

Amid exceptional uncertainty, Eurosystem staff have significantly revised up their inflation projections. They now see average inflation reaching 8.4% in 2022 before decreasing to 6.3% in 2023, with inflation expected to decline markedly over the course of the year.
inflation: Significant upward revision to inflation projections supports further rate hikes.

From the beginning of March 2023 onwards, the asset purchase programme (APP) portfolio will decline at a measured and predictable pace, as the Eurosystem will not reinvest all of the principal payments from maturing securities. The decline will amount to €15 billion per month on average until the end of the second quarter of 2023 and its subsequent pace will be determined over time.
balance sheet: Quantitative tightening starts March 2023 with a defined pace, adding to policy tightening.

Official documents

Background reading

8 September 2022 statement · 15 December 2022 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology