French inflation sinks to below 1% for first time since 2021
France's inflation rate dropped to below 1% in February for the first time in four years, with expectations rising that the European Central Bank will lower interest rates again next week as price pressures ease.
The annual increase in France's consumer price index (CPI) more than halved from January, slowing from 1.7% to just 0.8% this month, according to the National Institute of Statistics and Economic Studies (otherwise known as INSEE).
This was the lowest rate of inflation since February 2021 and significantly below the 1.2% level expected by economists. French inflation had peaked in the current cycle at 6.3% in February 2023.
Harmonised inflation, which is used to more accurately compare CPIs across the eurozone, fell to 0.9% from 1.8%.
INSEE said February's sharp slowdown in annual inflation can be explained by a significant fall back in energy prices, which fell 5.7% after increasing by 2.7% year-on-year in January, as electricity prices saw a big decline after growing strongly the year before. Services inflation also slowed, along with prices of manufactured products and tobacco. However, food inflation picked up slightly.
In other data on Friday, Italy's harmonised rate of annual inflation held steady at 1.7% in February, under the 1.8% consensus forecast and remaining firmly below the ECB's 2.0% target. German stats out at 1300 GMT are expected to show harmonised inflation easing to 2.7% from 2.8%.
"While we patiently await the German CPI release later today, market pricing around the potential for an additional four rate cuts this year has ticked up from 46% to 50% (according to Eikon)," said Joshua Mahony, chief market analyst at Scope Markets.
"Nonetheless, with heightened tariff fears taking hold, the prospect of a collapse in eurozone inflation does start to raise questions over the health of the economy."