French inflation eased more than expected from an all-time high, relieving a little pressure on the European Central Bank as calls for more aggressive action grow.
Author of the article:
Bloomberg News
William Horobin
(Bloomberg) — French inflation eased more than expected from an all-time high, relieving a little pressure on the European Central Bank as calls for more aggressive action grow.
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Consumer prices in the euro area’s second-largest economy advanced 6.5% from a year ago in August, compared with 6.8% in July. That marks a bigger slowdown than the 6.7% median estimate in a Bloomberg survey of economists.
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A slightly weaker increase in energy brought the inflation rate down, even as services prices rose at the same pace as last month and food and manufactured goods costs accelerated.
While the data may offer slight relief for ECB policy makers, all eyes will now be on inflation numbers for the 19-member euro zone as a whole, due at 11 a.m. Brussels time. The report is expected to show another record high, with figures released Tuesday from Germany — Europe’s biggest economy — demonstrating a similar trend.
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The situation has prompted some ECB officials to float a jumbo 75 basis-point rate increase at next week’s meeting, following July’s half-point move. Others, such as Chief Economist Philip Lane, are more cautious. He’s called for a step-by-step approach to allow households and companies to adjust.
In France, persistent price pressure is a headache for the government, which has already spent tens of billions of euros to mitigate the impact for households of what was initially expected to be a temporary surge in energy prices.
With price caps on electricity and natural gas set to expire at year-end, France is working on measures to help firms smooth the impact of increased bills.
A separate report for July showed households already cut back on expenditure due to surging prices. Consumer spending fell 0.8% from June, more sharply than the 0.2% contraction estimated by economists.
