Euro zone inflation fell unexpectedly last month, solidifying the case for the European Central Bank to start lowering borrowing costs from record highs.
The only potential concern for the ECB will be that services inflation has been holding steady at 4% for months now, suggesting that relatively quick wage growth is keeping prices in the sector under constant pressure. This is why investors see almost no chance of a cut on April 11 but have fully priced in a move for June, followed by another two or three steps later this year.
Wages have been growing relatively quickly in recent quarters but the pace of growth is slowing and workers are still only slowly recouping real purchasing power lost to several years of rapid inflation.
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