French inflation eased below 3% for the first time in 2 1/2 years, confirming a trend that has tipped the European Central Bank toward cutting interest rates.

Consumer prices in the euro area’s second-largest economy rose 2.4% from a year earlier in March after a 3.2% gain the previous month, statistics agency Insee said on Friday. The slowdown was sharper than the 2.8% forecast of economists surveyed by Bloomberg.

Data for the euro area next week are expected to show a slight slowdown in the rate for the currency bloc to 3% from 3.1% in February. Figures for Italy later on Friday are expected to show a rate of 1.5%.

With inflation nearing the European Central Bank’s 2% target, most policymakers have backed President Christine Lagarde’s signal that a first interest-rate cut will come in June. Economists and markets share that expectation, with investors almost fully pricing a reduction in the deposit rate to 3.75% from 4% at the institution’s June 6 meeting.

Bank of France Governor Francois Villeroy de Galhau has said a cut at the ECB’s next meeting on April 11 is also a possibility and warned that waiting too late to move risks inflicting undue damage on the economy.

“Risks to inflation are now balanced, but risks to growth are on the downside,” Villeroy said in a speech on Thursday. “The time has come to take out an insurance against this second risk by beginning rate cuts.”

Still, some policymakers remain cautious on wage increases that could continue to fuel prices pressures, particularly in the services sector where labour makes up a large share of costs.

France’s inflation report showed services inflation slowed to 3% in March from 3.2% in February. Manufactured goods also saw a cooling of price increases to 0.1% from 0.4%.

For the French government, recent disinflation is a double-edged sword. Slower price increases have undermined tax receipts, contributing to a widening of the budget deficit, but officials are also counting on easing cost pressures to help drive the economy out of stagnation.

A separate report from Insee on Friday showed consumer spending in February failed to grow from the previous month, when it declined 0.6%. Economists had expected a 0.2% increase.

  - Bloomberg