By David Barwick – FRANKFURT (Econostream) – Our Insights on April 7, April 1 and March 27 argued that recent European Central Bank Governing Council communication had increasingly come to sound like that of a body dutifully keeping April 30 live while sounding reluctant to move then. Bank of Slovenia Governor Primož Dolenc’s podcast comments on Wednesday reinforce that impression — despite almost certainly having been recorded before the overnight ceasefire between the United States and Iran.

To be sure, Dolenc indicated the direction of risk clearly enough, stating that “we are moving from bad to very bad or the worst possible outcomes” for both inflation and growth, and that “undoubtedly, we can get higher inflation, somewhat lower economic growth.”

But he also explicitly used uncertainty to justify patience at the March Governing Council meeting, and did so in a way that still applies now. That is, he justified holding rates unchanged until the ECB has “significantly more information about how things will unfold and what the consequences will be.”

The same patience comes across in his comparison with Europe’s significantly different position in 2022: now, inflation is close to target, inflation expectations remain anchored, the real economy is more resilient, fiscal policy is less expansionary, and monetary policy is already at what he called a neutral 2% rate.

“Which means that there was no rush to take action and we could wait for our future meetings,” he said.

He is neither arguing that the shock can be ignored nor denying that a prolonged conflict could eventually require a monetary response. But he is saying that the ECB’s starting point is materially better today and that this gives the Governing Council room to wait, analyze and update its judgment as new information arrives.

In that respect, his comments strengthen the conclusion of our April 7 Insight: April remains live and a worsening energy shock could still change the calculus. But the default mode of Council communication still sounds more like watchful restraint than like a build-up toward near-term tightening.

Moreover, the podcast was clearly recorded before its release, and almost certainly before the overnight ceasefire. Even before the latter development offered at least some prospect of de-escalation, he was speaking not as though an April hike were something the Council ought to be preparing markets for, but rather as though it were still trying to determine whether events would justify action at all.

Dolenc is no dove, sitting on our hawk-dove scale at a moderately hawkish 0.75. That makes his emphasis on patience more noteworthy.

If the public rhetoric were shifting toward a hike at month’s end, one would expect more officials to emphasize the risks of waiting. Dolenc instead emphasized scenarios, better starting conditions and the value of obtaining “ever newer data” over the coming weeks and months.

So another Council member has now made the point that the conflict may yet force the ECB’s hand, but not before the evidence becomes clearer. And if that was the tenor of Governing Council communication before the ceasefire, then that welcome overnight development can only add to the reasons, explained in our April 7 Insight, for doubting that the Governing Council is in any rush to hike on April 30 — and for wondering when the first Council member will potentially question whether a move is really needed at all.