Sunday, August 7

French Inflation Hits Fresh Record as ECB Prepares to Hike Rates


French inflation quickened to the fastest since the euro was introduced, raising pressure on President Emmanuel Macron and the European Central Bank to do more to contain the shock for firms and households.

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French inflation quickened to the fastest since the euro was introduced, raising pressure on President Emmanuel Macron and the European Central Bank to do more to contain the shock for firms and households.

Steeper increases in energy and food costs drove consumer-price growth to 6.5% in June from 5.8% in May, the Insee statistics agency said Thursday. The number is in line with the expectations of analysts in a Bloomberg survey.

The reading for the euro area’s second-largest economy provides further justification for the ECB’s plan to lift interest rates for the first time in more than a decade next month. After Spanish inflation soared to 10%, the French data will bolster officials who want to consider an initial hike beyond the planned 25 basis points.

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While German inflation wasn’t as strong as expected this month, ECB President Christine Lagarde said the key focus will now be on the figure for the entire 19-member euro zone, due Friday. Economists estimate it will show a record 8.5% advance in prices.

France has had some success in containing inflation relative to other European countries, with the government spending about 25 billion euros ($26.1 billion) to limit the increases in energy costs.

But Macron is being urged to do more, especially after losing his parliamentary majority in elections. Next week, his government plans to present a revised 2022 budget that would include another 25 billion euros to prolong existing measures and add new ones, such as boosts to pensions.

Despite those efforts, though, inflation has already hurt confidence and sapped economic momentum. While separate data Thursday showed consumer spending in May rose 0.7% from April, that follows five straight months of declines.



financialpost.com