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MNI ECB Review - December 2023: Refusing To Pivot...For Now

MNI ECB Review - December 2023: Refusing To Pivot..For Now

The ECB left the main policy instruments unchanged as expected. Given the weak economic data and significant fall in spot inflation, as well as the Fed’s pivot, the December meeting gave the ECB a clear opportunity to go dovish. In the event, President Lagarde did not take it and, instead, she argued that now is not the time to “lower our guard” while the press statement retained the same language on the policy rate setting: “sufficiently restrictive levels for as long as necessary.”

In addition, Lagarde indicated that there was some upside pressure on inflation over the short term, while updated staff macroeconomic projections show headline and core inflation remaining above target in 2025 (which Lagarde indicated was the focus of the forecast horizon, rather than 2026). The announcement on PEPP tapering was a touch hawkish given that most ECB watchers had expected a decision in January at the earliest, although the relatively slow pace of the taper (full reinvestment in H1 and EUR7.5/m on average in H2) was perhaps marginally dovish.

For the full publication please see:

ECB Review December 2023.pdf


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