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ECB's central scenario points to interest rate cut in June, De Cos says

FILE PHOTO: Spain's Central Bank Governor Hernandez de Cos attends a news conference in Nicosia

MADRID (Reuters) - The European Central Bank could start cutting interest rates in June after a continued slowdown in inflation in the euro zone, ECB policymaker Pablo Hernandez de Cos said on Wednesday.

His comments come after the euro zone inflation subsided unexpectedly last month, solidifying the case for the ECB to start lowering borrowing costs from record highs.

"As of today, the central scenario is that June could be the first interest rate cut," De Cos told a financial event in Barcelona.

Consumer price growth in the 20 nations sharing the euro currency slowed to 2.4% in March from 2.6% a month earlier, defying expectations for a steady rate as food, energy and industrial goods prices all pulled the headline figure lower.

Underlying inflation, closely watched by the ECB to gauge the durability of price pressures, meanwhile fell to 2.9% from 3.1%, coming below expectations for 3.0%, data from the EU's statistic's agency showed on Wednesday.

"The data has been a positive one, a further reduction in inflation, also in core inflation. Most importantly, it is compatible with the ECB's March forecast," the also Bank of Spain Governor said.

The ECB has been cautious in starting to ease policy because it only expects inflation back at its 2% target next year.

In its quarterly economic projections released in March, the ECB cut its forecast for price growth this year from 2.7% to 2.3% and said it now expects inflation to fall to 1.9% in summer 2025.

"Let me stress that this is not an unconditional projection, that we will obviously continue to receive information that will have to be carefully analysed," De Cos said.

Meeting next week, the central bank is expected to acknowledge the improved outlook but policymakers are unlikely to cut rates straight away.

Investors see almost no chance of a cut on April 11 but have fully priced in a move for June, followed by another two or three steps later this year.

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Andrei Khalip and Toby Chopra)