Inflation in France held steady at the start of 2024, providing some relief for policymakers dealing with budget deficit challenges, according to the country’s statistics agency INSEE on Friday.
The harmonised inflation rate, which allows comparisons across eurozone countries, remained at 1.8% year-on-year in January, the same level recorded in December. This keeps inflation below the European Central Bank’s (ECB) 2% target, strengthening expectations for further interest rate cuts.
ECB Rate Cut Signals Confidence in Disinflation
The inflation data comes just a day after the ECB reduced its key interest rate by 25 basis points. ECB President Christine Lagarde stated that the disinflationary trend is on track, though she cautioned that the economy is still facing headwinds.
Despite steady inflation, consumer confidence remains fragile, eurozone growth is stagnant, and possible US trade tariffs under the new administration could introduce further economic uncertainty.
France’s consumer price index (CPI), which is not harmonised for eurozone comparisons, rose by 1.4% year-on-year in January, slightly up from 1.3% in December.
On a monthly basis, CPI fell 0.1%, driven by lower prices for winter clothing, footwear, and transport. However, price increases were recorded in energy, food, tobacco, and insurance products.
Budget Deficit and Political Tensions in Focus
The steady inflation rate offers some relief to the French government, which is grappling with a deepening budgetary crisis.
Prime Minister François Bayrou recently introduced a new financing bill aimed at addressing the deficit. However, the government now faces a no-confidence vote in the National Assembly next week, as lawmakers decide whether to approve the proposed measures.
Meanwhile, the world’s attention turns to the eurozone, particularly Germany, where fresh inflation data is expected later on Friday.