(Bloomberg) -- The European Central Bank may stop describing its monetary policy stance as “restrictive” at its next decision in March, according to people familiar with the Governing Council’s debate.
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With another quarter-point cut in borrowing costs highly likely then, bringing the deposit rate down to 2.5%, such a level may not fully deserve that label anymore, said the people, who asked not to be identified citing confidential discussions.
A change in that terminology in the ECB’s statement is therefore something officials will weigh when they next discuss monetary policy, they said.
An ECB spokesperson declined to comment on how the Governing Council might adjust its language.
Such thinking suggests policymakers have started to ponder when to stop lowering borrowing costs and whether to take pauses along the way. Officially, the ECB says it won’t pre-commit, taking decisions one meeting at a time.
The euro erased an earlier slip after the report, trading flat around $1.042. German bond futures, meanwhile, trimmed their gains after the end of the European trading session. Before the report, traders were betting on a further three quarter-point rate reductions in 2025, which would take the deposit rate to 2%.
Officials have argued in the past that the sweet spot for interest rates that neither stimulates nor constrains the economy can be found somewhere between 1.75% and 2.5%. President Christine Lagarde offered a slightly narrower range of 1.75% to 2.25% in comments last week.
Greater precision in estimating that level would allow the ECB to better hone policy for the 20-nation euro economy, balancing the need to get inflation down toward 2%, while also ensuring that still-weak demand isn’t unnecessarily weighed down.
Some officials remain cautious about focusing too much on where the so-called neutral point of rates is, given that it’s difficult to measure, the people said.
Lagarde said her institution will publish a research report on Feb. 7 that will guide the Governing Council’s actions going forward.
“We will operate on the basis of a staff research paper, on the basis of the analysis provided by staff, and then that will help us determine how close we are and what our monetary policy stance should be,” she told reporters in Frankfurt. “If you’re asking me today whether we should go below neutral rate in order to stimulate the economy, I cannot tell you that that’s pretty obvious.”