French inflation slows unexpectedly
The skyline from the Arc de Triomphe in Paris, France.
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Inflation in France slowed to 6.7% in December from a record high of 7.1% the previous month, preliminary figures published Wednesday morning showed.
Economists polled by Reuters had forecast year-on-year harmonized inflation, which is adjusted for comparisons across the euro area, to come in at 7.2%.
The most significant drop was in energy, where prices rose by 15.1% annually, down from 18.4% in November.
That follows inflation slowing more than expected in Germany, which on Tuesday reported HICP falling to 9.6% from 11.3%; and in Spain, which last week recorded a fall to 5.8% from 6.7%.
Analysts are looking for indications that inflation has peaked in the euro zone’s main economies; and whether this will influence the European Central Bank, which previously said interest rates would need to go “significantly” higher.
Analysts at ING said the path to substantially lower inflation rates would not be easy and remained contingent on energy markets and agricultural challenges impacting food prices.
“[Germany’s] inflation numbers are not a relief, yet, only a reminder that eurozone inflation is still mainly an energy price phenomenon,” they said in a note. “The ECB cannot and will not base its policy decisions on highly volatile energy prices.”
Italy will report on inflation figures Thursday, followed by a flash estimate for the euro area on Friday.
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