The ECB is taking a risk by cutting interest rates as early as the spring of 2024

Euro-zone inflation is apparently under control (headline inflation was 2.4% in March 2024). The ECB has announced quite clearly that it will start cutting interest rates before the summer of 2024. But in reality, euro-zone inflation is much higher than headline inflation. When looking at: The GDP deflator (resulting from unit labour costs and profit margins); The negative contribution of import prices to the rise in consumer prices; Inflation excluding energy and unprocessed food; Prices of services; we can see that, depending on the indicator used, inflation in the euro zone ranges from 3.1% to over 4%, and is fairly stable. Moreover, the fall in import prices will gradually disappear. The ECB is therefore running the risk of reviving inflation and amplifying the rise in asset prices (particularly equities) by cutting interest rates in this environment. The main problem is the lack of productivity gains, which is keeping the labour market tight and unit labour costs rising rapidly.