We expect that the ECB will begin cutting interest rates in Q2. 

We believe that the improvement in inflation is sustainable and that below trend growth and restrictive monetary transmission will drive further weakness in inflation in coming months. 

Real policy rates have risen sharply, and we estimate they will make record highs during the first half of this year. 

The ECB wants to be doubly sure that inflation is sustainably trending towards 2.0%. It is therefore proceeding with caution.

Our assessment of current guidance from ECB officials is that hawks are in the ascendancy and there is a preference to wait for more data on wage growth before starting to cut. We think there is a consensus building around June.