Decrease in Inflation Deepens in France
August saw a decrease in inflation rates in France, with tentative numbers suggesting it dipped beneath the European Central Bank's (ECB) 2% threshold. The French national statistics institute (INSEE) reported that consumer prices grew by 1.9% year-on-year, which they shared on a Friday. The German Federal Statistical Office had previously revealed a unexpected drop in inflation to 1.9% the day prior.
Much like in Germany, INSEE attributed this to energy prices mostly. However, Germany experienced a considerable drop of 5.2% compared to the previous year, while France's price increase moderated to a mere 0.5%. Prices for food and services also increased at a less aggressive pace in France than in Germany.
These statistics could possibly prompt another interest rate reduction by the ECB. The ECB's responsible committee will deliberate on further monetary policy on September 13. Back in June, the ECB had led major Western central banks in reducing interest rates by 0.25%, setting the rate at which commercial banks can borrow from the ECB at 4.25%.
The central bank's objective is to maintain an inflation rate of 2%, utilizing the harmonized consumer price index as a reference point, enabling comparison between Eurozone nations. According to the German Federal Statistical Office, this rate stood at a precise 2% in August, while INSEE reported it being slightly above this goal in France at 2.2%.
The drop in inflation in France could also signal a potential further reduction in interest rates by the ECB, as they aim to maintain a rate of 2%.Also, the less aggressive price increase in France compared to Germany might influence the ECB's monetary policy discussions on September 13.
