Eurozone inflation hit a four-month low at 2.2% in March, but rising monthly prices and persistent services inflation leave the ECB divided ahead of its April 17 meeting, with markets pricing a 65% chance of a rate cut.

Euro zone inflation eased as expected last month and a key measure of underlying price pressures also fell, likely adding to already widespread expectations for another European Central Bank interest rate cut later in April.

With this new policy guidance, the ECB is, in our view, looking for a pause in rate cuts but not quite yet. We expect the rate to fall another quarter point in April to 2.25 per cent. Then, with low confidence, we expect officials to pause in June before another cut to 2 per cent in late summer or early autumn.