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Monetary policy meetings do not typically offer profound insights into the nature and limits of human understanding – but yesterday may have been an exception. The European Central Bank cut its key rate from 2.5% to 2.25% yesterday, in a widely expected move that is likely to soften the economic devastation caused by Donald Trump’s tariffs. Less anticipated, however, was the ECB’s omission of any reference to the “restrictive” nature of its monetary stance, which has featured in every single one of its policy statements for almost two years. This was no minor oversight. Central bankers are, after all, a linguistically scrupulous bunch, ever mindful of how what they (don’t) say might be perceived by market actors. Initially, analysts interpreted the word’s absence as a sign that the Governing Council, the ECB’s main decision-making body, believed that interest rates had reached “neutral” territory, where they neither stimulate nor restrain economic activity. If this were true, it would mean that Governing Council hawks, such as Austria’s Robert Holzmann, had won the day. After all, if the neutral rate has already been reached, the case for additional rate cuts becomes considerably more challenging – if not practically impossible. Indeed, some economists were so confident that this was the case that they didn’t even wait for the usual press conference with ECB President Christine Lagarde, held just half an hour after the official policy announcement, before going public with their views. “The ECB hawks managed to get rid of the ‘restrictive’ language,” announced Mark Wall, chief European economist at Deutsche Bank, just as Lagarde took to the stage in Frankfurt. Within minutes, Lagarde had dampened Wall’s theory with a cold bucket of facts – and a wave of dazzling conceptual analysis. | 
