Euro Zone Inflation Drops, Bolstering Case for ECB Rate Cuts

• Euro zone inflation fell unexpectedly to 2.4% in March from 2.6% in February, supporting the case for ECB rate cuts • Underlying inflation dropped to 2.9% from 3.1%, coming in below expectations of 3.0% • ECB expected to acknowledge improved outlook at April 11 meeting but unlikely to cut rates until June • Dovish policymakers argue ECB can ease policy as inflation seen back at 2% target in 2023 and growth is weak • Most ECB policymakers appear to agree deposit rate, now at 4%, will restrict growth until it reaches around 3%