French inflation slowed to the lowest level in more than a year, adding to signs the European Central Bank is making progress in its battle to ease price pressures with interest-rate hikes.
(Bloomberg) — French inflation slowed to the lowest level in more than a year, adding to signs the European Central Bank is making progress in its battle to ease price pressures with interest-rate hikes.
The measure of annual consumer-price changes in the euro zone’s second-largest economy stood at 5.3% in June after 6% in May, statistics agency Insee said. Economists surveyed by Bloomberg had on average predicted a 5.4% rise.
Italy, Belgium and the Netherlands all showed slowing inflation this month, along with Spain’s more remarkable outcome below the ECB’s 2% target. A report for the whole currency bloc later Friday is also expected to show weakening in headline price growth.
Still, the ECB must reckon with mixed signals. German consumer-price gains accelerated this month, and euro-zone measures of underlying inflation, which have become a key focus of policymakers, are expected to rise.
“We have made our future policy decisions conditional on, first, the inflation outlook, second, the dynamics of underlying inflation and third, the strength of policy transmission,” ECB President Christine Lagarde told an annual retreat in Portugal earlier this week. “Barring a material change to the outlook, we will continue to increase rates in July.”
Her colleague, Vice President Luis de Guindos, described such a decision as a “fait accompli,” but said the prospect of a further increase at the subsequent meeting in September is still an open question among officials as they gauge the strength of underlying price pressures.
In its preliminary figures, France doesn’t report so-called core inflation data stripping out volatile elements such as energy. Insee’s publication showed services prices rose 2.9%, slowing for a second month. However, manufactured-goods inflation accelerated to 4.3%.
The rising cost of living in France is already hurting consumers, and the economy is set to record only lackluster growth this year. In a separate release, Insee said household outlays rose 0.5% in May as spending on clothing, food and energy rebounded. That’s slightly below 0.7% increase anticipated in a Bloomberg survey.
–With assistance from Mark Evans and Ainhoa Goyeneche.
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