Eurozone: will slowdown in inflation be sufficient for ECB to continue cutting rates?

By the time its next monetary policy meeting is held on 17 April, the European Central Bank will have very few new indicators (March PMIs, March inflation flash estimate, Bank Lending Survey), whereas far more data will have become available ahead of the June meeting. We expect E urozone inflation to ebb further in March, down to 2.3% from 2.4% in February, but will this be enough for the ECB to reduce its rates in April? Looking beyond the lone March reading , and after factoring in our new assumptions for crude oil prices and the euro’s recent appreciation , this has led us to revise our inflation projections downwards, to 2% for 2025 and 1.6% for 2026, well below the Eurosystem's March forecasts (2.3% for 2025 and 1.9% for 2026). Aside from inflation, our view is that the most important ‘data’ for the ECB will be developments in the trade war with the United States (downside risk to activity , susceptible of leading to further rate cuts) and Germany's fiscal stimulus plan with spending on infrastructure and defence ( which could lead some hawkish members of the Governing Council to err on the side of caution given the inflationary impact, which nevertheless does seem limited out to 2026 - 2027 ) . Our scenario therefore remains for two 25bp cuts in April and June of this year, taking the deposit rate to 2% in June.