European Central Bank Statement comparison — 4 May 2023 vs 14 September 2023

This European Central Bank statement comparison covers 4 May 2023 and 14 September 2023. Overall, the newer document was mixed. The ECB maintained its hawkish inflation stance and hiked rates by 25bp, but the forward guidance shifted to signal that rates may have peaked, with increased concern about economic growth. This suggests a potential pause in the hiking cycle, with future decisions dependent on data.

What changed

Mixed. The ECB maintained its hawkish inflation stance and hiked rates by 25bp, but the forward guidance shifted to signal that rates may have peaked, with increased concern about economic growth. This suggests a potential pause in the hiking cycle, with future decisions dependent on data.

Inflation — More hawkish. Both documents describe inflation as too high and underlying pressures strong, but the current document notes that most indicators have started to ease, a minor softening within an overall hawkish stance.
Labour Market — Little changed. Neither document contains explicit labour market passages; no shift in assessment.
Rate Path — More dovish. The prior document's hawkish forward guidance (rates to be kept restrictive) is replaced by a neutral signal that rates may have reached their peak, reinforced by a dovish risk balance highlighting growth downgrades.
Balance Sheet — Little changed. The prior document announced the discontinuation of APP reinvestments, a hawkish balance sheet action; the current document makes no mention of balance sheet policy, indicating no new changes.

Key wording

4 May 2023

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.

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.

14 September 2023

Inflation continues to decline but is still expected to remain too high for too long.
inflation: Justifies the hike and hawkish stance; inflation still problematic.

The September ECB staff macroeconomic projections for the euro area see average inflation at 5.6% in 2023, 3.2% in 2024 and 2.1% in 2025. This is an upward revision for 2023 and 2024 and a downward revision for 2025.
inflation: Inflation forecasts revised up for near term, delaying return to target.

With the increasing impact of this tightening on domestic demand and the weakening international trade environment, ECB staff have lowered their economic growth projections significantly.
rate path: Growth downgrade highlights trade-off between inflation and recession risk.

Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target.
rate path: Signals rates may be at peak, but no cut in sight; duration matters.

Official documents

Background reading

4 May 2023 statement · 14 September 2023 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology