Euro zone inflation fell to a three-year low of 2.2% in August, preliminary figures from statistics agency Eurostat showed on Friday, boosting expectations of a September rate cut by the European Central Bank.

The drop from July’s 2.6% was in line with the forecast of economists polled by Reuters.

The core rate, which excludes the more volatile components of energy, food, alcohol and tobacco, fell to 2.8% in August from 2.9% in July, also in line with a Reuters poll.

The euro continued to fall against the British pound after the news, trading 0.1% lower at 0.8408 pounds. The euro rose 0.04% against the US dollar to $1.1083 as investors brace for the Federal Reserve’s September rate cut, its first step toward monetary easing in the current cycle.

This comes after price increases in Germany, the eurozone’s largest economy, cooled more than expected to 2% during the month, on a eurozone harmonised basis.

ING economists expect eurozone core inflation to remain stubbornly above 2.5% for the rest of the year amid tighter prices for goods and services.

Markets have already fully priced in that the ECB will cut interest rates by another 25 basis points in September, after the institution made its first rate cut in June, and that there will be another 25 basis point cut before the end of the year.

Kyle Chapman, a currency analyst at the Ballinger Group, said the statement nevertheless contained details that would worry ECB policymakers, in particular the 4.2% inflation in services.

“The positive headline is purely due to energy price effects and masks the fact that little real progress has been made on underlying pressures,” Chapman said in a note.

“Services inflation, which is at its highest level since last October, has been stuck in the 4% area for almost a year and has been going in the wrong direction since the spring.”

Speaking ahead of the latest data release, Ed Smith, co-chief investment officer at Rathbones Asset Management, said on CNBC’s “Squawk Box Europe” on Friday that the central bank was on track for further rate cuts, highlighting ECB President Christine Lagarde’s focus on wage inflation.

“Negotiated wages are an important issue in the eurozone, [they] They represent approximately 80% of the workforce [who] “Negotiated wages across the euro area fell sharply in the second quarter, as did other indicators such as Indeed.com quotes… the ECB’s telephone survey of businesses… also points to a decline in wage increase intentions.”

“But there is a certain rigidity, the last one [purchasing managers’ index] “Services sector figures and surveys showed some stickiness in price components,” he added, noting that this would keep some ECB voting members cautious.