European Central Bank Statement comparison — 14 December 2023 vs 7 March 2024
This European Central Bank statement comparison covers 14 December 2023 and 7 March 2024. Overall, the newer document was more dovish. The ECB holds rates steady but the inflation outlook improves markedly, while balance sheet tightening deepens. The addition of data-dependent language in forward guidance hints at future easing if data allows, but near-term policy remains restrictive.
What changed
More dovish. The ECB holds rates steady but the inflation outlook improves markedly, while balance sheet tightening deepens. The addition of data-dependent language in forward guidance hints at future easing if data allows, but near-term policy remains restrictive.
- Inflation — More dovish. Inflation projections revised down significantly, with headline seen returning to target by 2025 and undershooting in 2026, a clear dovish shift from prior higher projections.
- Labour Market — Little changed. No labour market passages in either document; no change.
- Rate Path — More dovish. Forward guidance adds a neutral data-dependent clause while retaining hawkish duration language, and risk balance shifts from dovish (weak growth) to neutral (restrictive conditions working), netting to a slight dovish tilt.
- Balance Sheet — More hawkish. Balance sheet policy moves from full PEPP reinvestment to active monthly reductions of €7.5 billion, a hawkish intensification of quantitative tightening.
Key wording
Overall, staff expect headline inflation to average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026.
Underlying inflation has eased further. But domestic price pressures remain elevated, primarily owing to strong growth in unit labour costs.
Eurosystem staff expect economic growth to remain subdued in the near term.
The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary.
The Governing Council also decided today to advance the normalisation of the Eurosystem’s balance sheet. It intends to continue to reinvest, in full, the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP) during the first half of 2024. Over the second half of the year, it intends to reduce the PEPP portfolio by €7.5 billion per month on average. The Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
Staff now project inflation to average 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026.
Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages.
Financing conditions are restrictive and the past interest rate increases continue to weigh on demand, which is helping push down inflation.
The Governing Council’s future decisions will ensure that policy rates will be set at sufficiently restrictive levels for as long as necessary.
Over the second half of the year, it intends to reduce the PEPP portfolio by €7.5 billion per month on average.
Official documents
Background reading
Related
14 December 2023 statement · 7 March 2024 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.