ECB Rate Cuts on Horizon as Inflation Approaches Target

• ECB officials saw enough evidence in March to conclude that rate cuts were nearing, as inflation moves toward the 2% target

• Policymakers agreed it was premature to discuss rate cuts at the March meeting, but the case was strengthening

• By the June meeting, officials will have more data to be confident about the sustainability of disinflation

• Markets have already repriced expectations, with an 85% chance of a June cut, reflecting slower disinflation

• Questions remain about wage growth, productivity, profits, and services inflation sustainability