What changed in the European Central Bank statement — 7 March 2024

European Central Bank held policy at 4.00%. The March statement maintains the peak-rate stance but introduces a more dovish inflation outlook with explicit projections showing inflation returning to target by 2025 and slightly undershooting in 2026. The subtle dovish tilt in inflation assessment is offset by unchanged hawkish rate guidance, suggesting the ECB is not yet ready to cut and will remain data-dependent in the coming months.

Decision

Decision: hold
Deposit facility rate: 4.00%

Going into the decision

On the day, the committee read as dovish — -0.9 on a scale where +3 means every member wants higher rates and −3 means every member wants cuts.

Reconstructed from official member remarks published before the decision date. 6 of 27 active members had stored official remarks.

What changed

The March statement maintains the peak-rate stance but introduces a more dovish inflation outlook with explicit projections showing inflation returning to target by 2025 and slightly undershooting in 2026. The subtle dovish tilt in inflation assessment is offset by unchanged hawkish rate guidance, suggesting the ECB is not yet ready to cut and will remain data-dependent in the coming months.

Inflation — More dovish. Current inflation projections show a return to target by 2025 and a slight undershoot in 2026, whereas prior only noted a declining trend; this is a dovish shift despite continued mention of domestic wage pressures.
Labour Market — Little changed. No labour market passages in either document; characterisation unchanged.
Rate Path — Little changed. Both statements retain the same hawkish forward guidance on rates being restrictive for long enough, but the current document omits the prior's explicit intention to discontinue PEPP reinvestments, a slight dovish nuance; overall unchanged.
Balance Sheet — Little changed. Risk balance language remains neutral in both documents, with acknowledgement that restrictive financing conditions are working.

Previous wording

Aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued, and the past interest rate increases keep being transmitted forcefully into financing conditions.
inflation: Underlying inflation declining but transmission forceful; suggests rates are working.

Tight financing conditions are dampening demand, and this is helping to push down inflation.
inflation: Demand dampening supports disinflation; sign that policy is effective.

The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary.
rate path: Reinforces commitment to restrictive stance; no near-term cuts signaled.

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.
rate path: Quantitative tightening schedule announced; reduces overall accommodation.

The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation returns to its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
rate path: Standard readiness language; no specific risk mentioned.

Current wording

Staff now project inflation to average 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026.
inflation: Inflation seen returning to target by 2025, undershooting in 2026.

Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages.
inflation: Wage pressures keep domestic inflation sticky.

The Governing Council’s future decisions will ensure that policy rates will be set at sufficiently restrictive levels for as long as necessary.
rate path: Commitment to keep rates restrictive.

Financing conditions are restrictive and the past interest rate increases continue to weigh on demand, which is helping push down inflation.
rate path: Acknowledges transmission working.

Official statement

Monetary policy decisions

7 March 2024

The Governing Council today decided to keep the three key ECB interest rates unchanged. Since the last Governing Council meeting in January, inflation has declined further. In the latest ECB staff projections, inflation has been revised down, in particular for 2024 which mainly reflects a lower contribution from energy prices. Staff now project inflation to average 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026. The projections for inflation excluding energy and food have also been revised down and average 2.6% for 2024, 2.1% for 2025 and 2.0% for 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. Staff have revised down their growth projection for 2024 to 0.6%, with economic activity expected to remain subdued in the near term. Thereafter, staff expect the economy to pick up and to grow at 1.5% in 2025 and 1.6% in 2026, supported initially by consumption and later also by investment.

The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal. The Governing Council’s future decisions will ensure that policy rates will be set at sufficiently restrictive levels for as long as necessary.

The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. In particular, the Governing Council’s interest rate decisions will be based on 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.

Key ECB interest rates

The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.50%, 4.75% and 4.00% respectively.

Asset purchase programme (APP) and pandemic emergency purchase programme (PEPP)

The APP portfolio is declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.

The Governing Council intends to continue to reinvest, in full, the principal payments from maturing securities purchased under the 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.

The Governing Council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic.

Refinancing operations

As banks are repaying the amounts borrowed under the targeted longer-term refinancing operations, the Governing Council will regularly assess how targeted lending operations and their ongoing repayment are contributing to its monetary policy stance.

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The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation returns to its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission. Moreover, the Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries, thus allowing the Governing Council to more effectively deliver on its price stability mandate.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:45 CET today.

Background reading

Cadence's comparison is generated from the official documents. Read the methodology.