ECB’s March 5-6 meeting accounts revealed a heated debate among Governing Council members over both the 25bps rate cut decision and the tone of accompanying communications.
With considerable uncertainty clouding the outlook—ranging from global trade policy to persistent services inflation—many policymakers urged caution, particularly in avoiding language that could be construed as forward guidance. The balance of risks, especially from tariff escalations and uneven disinflation, made it clear that any commitment to further cuts would be premature.
A few members were only willing to support the March rate cut on the condition that the policy statement “avoided any indication of future cuts or of the future direction of trave”.
This led to a debate on whether to remove the phrase “monetary policy remains restrictive”. In the end, Chief Economist Philip Lane’s proposed compromise—“monetary policy is becoming meaningfully less restrictive”—was broadly accepted.
This phrasing was viewed as neutral enough to reflect the evolving inflation outlook without implying a preset path.
Crucially, the ECB emphasized that the revised language should not signal the outcome of April’s meeting. “Both a cut and a pause” are “on the table, depending on the incoming data.
