France’s inflation rate remained unchanged at the beginning of 2024, reinforcing expectations that the European Central Bank (ECB) may continue easing interest rates. The country’s statistics agency INSEE confirmed on Friday that price growth stayed below the ECB’s 2% target, offering some relief to policymakers grappling with economic uncertainty and budget deficits.
The harmonised inflation rate, which aligns with eurozone measurement standards, remained at 1.8% year-on-year in January, the same as in December.
ECB Cuts Rates, but Economic Challenges Persist
The steady inflation figures follow the ECB’s recent decision to lower interest rates by 25 basis points on Thursday. ECB President Christine Lagarde acknowledged that the disinflation process is progressing well, though she cautioned that the eurozone economy still faces obstacles.
Despite controlled inflation, consumer confidence remains fragile, the region’s growth is stagnating, and looming trade tariffs from the US could further impact Europe’s economic stability.
France’s national consumer price index (CPI), which is not harmonised for eurozone comparisons, rose 1.4% year-on-year in January, slightly above December’s 1.3%.
On a monthly basis, CPI declined 0.1%, primarily due to lower winter clothing, footwear, and transport costs. Meanwhile, energy, food, tobacco, and insurance prices increased.
Government Faces Pressure Over Budget Deficit
The stable inflation rate provides some respite for the French government, which is battling a widening budget deficit.
Prime Minister François Bayrou recently presented a new financing bill to address the country’s fiscal challenges. However, political tensions are rising as he prepares to face a no-confidence vote in the National Assembly next week, where lawmakers will decide on the proposed economic measures.
Elsewhere in the eurozone, Germany is set to release its latest inflation data later on Friday, providing additional insights into the region’s business economic outlook.
