European Central Bank Statement comparison — 27 October 2022 vs 16 March 2023
This European Central Bank statement comparison covers 27 October 2022 and 16 March 2023. Overall, the newer document was more dovish. The ECB maintained a hawkish inflation assessment but delivered a smaller rate hike and introduced a liquidity backstop, representing a modest dovish pivot. The next decision is likely a further 25bp hike or a pause depending on data and financial conditions.
What changed
More dovish. The ECB maintained a hawkish inflation assessment but delivered a smaller rate hike and introduced a liquidity backstop, representing a modest dovish pivot. The next decision is likely a further 25bp hike or a pause depending on data and financial conditions.
- Inflation — More hawkish. Inflation language remains strongly hawkish with focus on persistent and broadening pressures, and core inflation revised upward justifies continued tightening.
- Labour Market — Little changed. No labour market assessment in either set of key passages; no shift detected.
- Rate Path — More dovish. The pace of tightening slowed from 75bp to 50bp, and forward guidance added a liquidity backstop, indicating a slightly less aggressive tightening path.
- Balance Sheet — More dovish. The addition of a liquidity support pledge signals a more accommodative balance sheet stance amid financial stability concerns.
Key wording
The Governing Council today decided to raise the three key ECB interest rates by 75 basis points.
The Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target.
The Governing Council will base the future policy rate path on the evolving outlook for inflation and the economy, following its meeting-by-meeting approach.
Inflation remains far too high and will stay above the target for an extended period.
In recent months, soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand have led to a broadening of price pressures and an increase in inflation.
The Governing Council’s monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations.
Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points
The elevated level of uncertainty reinforces the importance of a data-dependent approach to the Governing Council’s policy rate decisions, which will be determined by its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.
In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.
Inflation is projected to remain too high for too long.
ECB staff now see inflation averaging 5.3% in 2023, 2.9% in 2024 and 2.1% in 2025.
The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area.
Official documents
Background reading
Related
27 October 2022 statement · 16 March 2023 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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