With the market leaning towards a June rate cut, the latest inflation and wage data for the Eurozone suggest price pressure continues to ease in line with expectations, building the case for a shift in ECB policy at its next meeting.
Nevertheless, while some bumps in the road to a sustainable 2% inflation rate can be expected, the drivers of the inflationary surge in recent years have now largely dissipated.
Thirdly, the sharp rise in wages across the Eurozone in recent years, which has underpinned core inflation, appears to be moderating sharply.
Taken together, the data should give ECB policymakers comfort that a first rate cut is necessary in June.
