Euro Area Viewpoint: ECB watching 101: economics and rates

Research evidence excerpt

Euro Area Viewpoint: ECB watching 101: economics and rates

market…) and monetary and financial analysis (the transmission mechanism – i.e., credit

lending, interest rates…).

In 2020/21, the ECB started to conduct five-year “strategy reviews” – holistic and far-

reaching exercises. The next one is due in 2030.

Our US and UK colleagues have already discussed the trade-offs central banks face

between bringing inflation back to target as quickly and as durably as possible and

avoiding a material disruption to activity (see the reports, Fed watching 101 and BoE

watching 101). The arbitrage can differ, of course. The ECB’s single inflation mandate,

paired with an elevated focus on upside inflation risks, makes for a relatively more

hawkish underlying orientation of the ECB compared to peers.

How does the ECB communicate?

How does the ECB communicate policy decisions?

The ECB holds eight regular monetary policy meeting per year. Four of those (March,

June, September, December) come with a new set of forecasts – more on those below.

The press release after the meeting is published on Thursdays at 2:15 CET. It typically

contains the main policy decisions – interest rates, non-conventional tool, forecasts.

During the hour-long press conference, a prepared monetary policy statement is read

out, followed by Q&A with the ECB President and the Vice President.

The ECB also releases “monetary policy accounts” – i.e., meeting minutes, released four

weeks after the meeting. Unlike elsewhere, this is not a proper “protocol” but a heavily

edited (and very long) document. As such, it can also provide hints on the ECB view on

developments after the policy meeting.

How does the ECB make forecasts?

It is worth keeping in mind the following elements in quarterly ECB forecasts: