A woman is taking a selfie with the Eiffel Tower in the background on the Street of Surcoup in Paris on July 23, 2024, ahead of the 2024 Paris Olympics.
Mauro Pimentel | Afp | getty images
France’s harmonized inflation rate fell sharply in September, preliminary data from France’s National Institute of Statistics and Economics (Insee) said on Friday.
Harmonized consumer prices in the euro zone’s second-largest economy fell to 1.5% in September from 2.2% in August. The Harmonized Consumer Price Index (HICP) has been adjusted for comparison with other euro area countries.
The HICP figure, below the 2.0% expected by economists polled by Reuters, is likely to put pressure on European Central Bank (ECB) policymakers to take steps to stimulate the broader economy.
The ECB cut interest rates by 25 basis points to 3.5% earlier this month, restarting a cycle of rate cuts that began with a landmark move in June.
The euro fell on the news before cutting losses. It was trading at $1.1165, down about 0.1% at 1:30 pm London time.
Preliminary estimates of France’s consumer price index (CPI) fell to 1.2% in September from 1.8% in August, according to official data.
Overall, Insee said the decline in consumer prices in September represented the steepest monthly decline since 1990.
Insee said the sharp decline in inflation reflects a significant decline in energy prices, especially petroleum products, as well as seasonal effects due to falling transport costs and the normalization of certain tariffs following the Olympic and Paralympic Games. stratagem.
Insee said it expected cigarette prices to be virtually unchanged in September compared to the previous month.
The possibility of further interest rate cuts by the ECB also rises.
Separately, Spain’s harmonized inflation rate fell to 1.7% in September from 2.4% in August, according to preliminary data released Friday by Spain’s National Institute of Statistics (INE).
The figure was slightly lower than the 1.9% expected by analysts surveyed by Reuters. Like France, Spain’s harmonized inflation rate was below the ECB’s 2% target.
Meanwhile, Spain’s preliminary CPI estimate fell from 2.3% in August to 1.5% in September.
A plunge in September inflation data from France and Spain has raised expectations that headline interest rates across the euro zone will fall sharply below the ECB’s 2% target.
Statistics agency Eurostat is due to release flash euro zone inflation data for September on Tuesday. Eurozone inflation fell to a three-year low of 2.2% in August.
“A slightly lower core inflation in the euro zone would not come as a big surprise to the ECB, so it is unlikely to significantly change the thinking of policymakers,” Franziska Palmas, senior European economist at Capital Economics, said in a research note. “It’s low,” he said.
“So at the moment we think the bank is most likely to keep rates on hold next month, but the weakening corporate survey results make a rate cut more likely,” Palmas said.
