European Central Bank Statement comparison — 15 December 2022 vs 4 May 2023

This European Central Bank statement comparison covers 15 December 2022 and 4 May 2023. Overall, the newer document was mixed. The ECB continued its tightening cycle with a smaller 25bp hike but maintained a hawkish inflation outlook and intensified QT. The overall stance remains hawkish, but the slower pace and increased caution on transmission suggest the peak is nearing; the next decision likely another 25bp hike or a hold depending on data.

What changed

Mixed. The ECB continued its tightening cycle with a smaller 25bp hike but maintained a hawkish inflation outlook and intensified QT. The overall stance remains hawkish, but the slower pace and increased caution on transmission suggest the peak is nearing; the next decision likely another 25bp hike or a hold depending on data.

Inflation — Little changed. Inflation assessment remains hawkish in both documents, with current emphasizing 'too high for too long' and 'underlying price pressures remain strong', similar to prior's focus on persistent underlying pressures.
Labour Market — Little changed. No labour market assessment in either document; no shift.
Rate Path — More dovish. The pace of rate hikes slowed from 50bp to 25bp, and forward guidance shifted from 'raise them significantly at a steady pace' to 'brought to levels sufficiently restrictive' with acknowledgment of transmission uncertainty, a modest dovish tilt.
Balance Sheet — More hawkish. Quantitative tightening intensified from partial reinvestment to full discontinuation of APP reinvestments as of July 2023, a hawkish shift.

Key wording

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.

The Governing Council’s future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach.
rate path: Reiterates data dependence, leaving flexibility but no dovish pivot signal.

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.

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.

4 May 2023

the Governing Council today decided to raise the three key ECB interest rates by 25 basis points.
rate path: Confirms the rate hike itself.

At the same time, the past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain.
rate path: Acknowledges transmission but flags uncertainty about its full impact.

The Governing Council’s future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary.
rate path: Commitment to keep rates high for an extended period.

The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
rate path: Leaves room for flexibility in future decisions.

The inflation outlook continues to be too high for too long.
inflation: Strong language on inflation persistence justifies further tightening.

Headline inflation has declined over recent months, but underlying price pressures remain strong.
inflation: Underlying inflation sticky, supporting further rate increases.

Official documents

Background reading

15 December 2022 statement · 4 May 2023 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology