French inflation held steady in January, offering some relief to policymakers grappling with ongoing budget deficit issues.
According to France’s national statistics agency INSEE, the country’s harmonised inflation rate, which allows for comparison with other eurozone nations, remained at 1.8% year-on-year in January, the same as in December. This figure stays below the European Central Bank’s (ECB) 2% inflation target.
This inflation data follows the ECB’s recent decision to lower its key interest rate by 25 basis points on Thursday. ECB President Christine Lagarde remarked that the disinflationary process is “well on track,” although she noted that “the economy is still facing headwinds.”
Consumer confidence remains fragile, eurozone growth is stagnating, and potential tariffs from the new US administration add uncertainty to Europe’s inflation outlook. France’s consumer price index (CPI), which is not harmonised for comparison, rose by 1.4% year-on-year in January, a slight increase from 1.3% in December.
On a monthly basis, CPI fell by 0.1% in January, mainly due to lower prices for winter clothing, footwear, and transport. However, there were price increases for energy, food, tobacco, and insurance products.
The stable inflation figures come as a welcome sign for the French government, which is currently tackling a significant economic deficit. Prime Minister François Bayrou recently introduced a financing bill to address this issue.
Bayrou will face a no-confidence vote in the National Assembly next week, where lawmakers will decide whether to support the government’s proposed measures.
Later on Friday, Germany is also expected to release its latest inflation data.
