France's latest inflation readings offered a mixed but broadly stabilising view in July. INSEE reported that inflation excluding tobacco rose 0.6% month-on-month, reversing a -0.3% decline in June and indicating renewed short-term pressure in consumer prices. The EU-harmonised consumer price index held at 2.4% year-on-year in July, matching market forecasts and unchanged from June, while the monthly increase slowed to 0.1% from 0.2%.
France's annual HICP remained slightly below the eurozone average of 2.5%, with Germany at 2.6% and Spain at 2.9%. Government measures such as electricity price caps and fuel discounts have kept French inflation lower, though underlying pressures may appear as these are phased out.
The data supports the European Central Bank's case for gradually reducing borrowing costs. With inflation easing toward the ECB's 2% target, attention now turns to the September policy meeting, where a rate cut is seen as likely. Lower rates tend to improve liquidity conditions and can support risk assets, including cryptocurrencies.
Market reaction was muted because the figures were widely expected. The euro remained stable against the dollar and French bond yields were unchanged. Economists expect inflation to stay around 2% through the end of the year, with services costs and wage growth remaining key upside risks.
