The ECB got right to the point on Thursday while hiking rates by another 50bps.

“The Governing Council will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to its 2% medium-term target,” policymakers declared, in the very first sentence of the new statement.

The second sentence was equally terse, and about as direct as central bank statement language gets in the modern era of chatty policymaking: “The Governing Council today decided to raise the three key ECB interest rates by 50bps and it expects to raise them further.”

Then, in a remarkably unequivocal pre-commitment, the ECB guaranteed another half-point move in March, but paired it with what might be construed as a pre-announced pause. “In view of the underlying inflation pressures, the Governing Council intends to raise interest rates by another 50bps at its next monetary policy meeting in March and it will then evaluate the subsequent path of its monetary policy,” the bank said, on the way to insisting on the notion that the ECB intends to hold rates in restrictive territory for a time in order to “dampen demand” and prevent expectations from becoming unanchored.

The total amount of hiking delivered since Christine Lagarde exited NIRP last summer is now 300bps. Recall that the ECB’s response to surging inflation was even more belated than it would’ve been anyway thanks to the necessity of working around preexisting forward guidance.

Taken with the Bank of Canada’s going-forward pause (as communicated alongside last week’s 25bps hike) and the Bank of England’s indication that Bank Rate is on hold following Thursday’s 50bps move, it’s plain that developed market policymakers are approaching the end of the hiking cycle. If you’re a macro pessimist, you might suggest they’re merely approaching the end of the opening salvo in what will ultimately be a long war of attrition against inflation. I’m sympathetic to either view.

The ECB’s Thursday move came a day after preliminary inflation data for January suggested headline price growth decelerated more than expected last month, even as core inflation remained stuck at a record high. GDP figures released earlier this week showed the bloc’s economy managed a meager expansion in Q4, no small feat considering how dire the winter could’ve been. The problem, though, is that the better the economy performs, the more scope for inflation to percolate.

“The increasing probability that a recession will be avoided in the first half of the year gives companies more pricing power, showing that selling price expectations remain elevated,” ING’s Carsten Brzeski said. “The celebrated fiscal stimulus, which has eased recession fears, is an additional concern for the ECB as it could transform a supply-side inflation issue into demand-side inflation.” That’s a very important point.

The bank’s capacity to corral inflation was questionable last year, given the obvious link between explosive price growth and the war. Now, there are signs that price pressures are finding their way into wage-setting, which is problematic. The ECB can combat that, though, or at least they can plausibly claim that monetary policy has a fighting chance of making a difference. By contrast, there was nothing monetary policy could do to restart flows through the Nord Stream.

In December, Lagarde was keen to emphasize that the step-down from 75bps hike increments was in no way, shape or form a dovish development. Thursday’s statement language was a clear attempt to reinforce that message, although the rather transparent nod to a pause following one more half-point hike in March risked emboldening markets anxious to perceive a light at the end of the tightening tunnel.

Recall that the December ECB decision was also accompanied by a sketch of the bank’s QT plans. The ECB elaborated a bit on Thursday. Reinvestments (so, proceeds from maturing bonds above the €15 billion per month runoff pace planned from March through June) will be allocated proportionally to the share of redemptions. Reinvestments from corporate bonds will be “tilted more strongly towards issuers with a better climate performance” in order to “support the gradual decarbonization of the Eurosystem’s corporate bond holdings, in line with the goals of the Paris Agreement.”

The PEPP guidance was unchanged. Principal payments from assets purchased via the pandemic QE facility will be reinvested until at least the end of 2024. As a reminder: The ECB probably intends to flexibly allocate those payments to control any undue widening in periphery spreads associated with market volatility, should any such widening materialize.