FRANKFURT, Feb 1 Reuters Euro zone inflation eased as expected last month but underlying price pressures fell less than forecast, likely boosting the European Central Bank39;s argument that rate cuts should not be rushed, even if the next move is still going to be policy easing.

Consumer inflation in the 20 nations sharing the euro dipped to 2.8 in January from 2.9 in December, in line with expectations and inching towards the ECB39;s own 2 target, data from Eurostat, the EU39;s statistics agency, showed on Thursday.

Price growth, now a long way from its peak in double digit territory in late 2022, fell as unprocessed food, energy and industrial goods inflation all slowed.

But underlying price growth, a key measure watched by the ECB because it excludes volatile food and energy costs, only dipped to 3.3 from 3.4 and came above forecasts for 3.2.

The mild disappointment came as services inflation held steady at 4.0, pointing to lingering price pressures, particularly from wages.

Although the ECB was adamant last week that a rate cut is not even being discussed, policymakers are sounding increasingly confident that inflation is coming under control, suggesting that the bank was nearing an easing cycle.

These bets got another boots overnight when U.S. Federal Reserve Chair Jerome Powell took a similarly upbeat tone, openly discussing the possibility of rate cuts, even if he said March was likely too soon.

For the ECB, investors now see a combined 142 basis points of…