French inflation falls to five-year low as energy prices decline

French inflation slowed more than expected in January, dropping to its lowest level in nearly five years as falling energy prices and discounted consumer goods weighed on costs.

Consumer prices rose just 0.4% year-on-year in January, down from 0.7% in December, according to data released by national statistics agency Insee. The figure was well below the 0.6% median forecast in a Bloomberg survey of economists, with only one analyst accurately predicting the outcome. It marked the weakest inflation rate since December 2020.

France continues to stand out among the euro zone’s largest economies, where inflation remains closer to the European Central Bank’s 2% target. By comparison, inflation stood at 2.1% in Germany and 2.4% in Spain last month.

Despite France’s unusually low reading, economists do not expect the data to influence ECB policymakers, who are meeting this week in Frankfurt and are widely expected to leave interest rates unchanged, with inflation across the currency bloc running near target.

French central bank Governor François Villeroy de Galhau has cautioned that downside risks to inflation in Europe are now at least as significant as upside pressures. He has also noted that the recent strengthening of the euro could further dampen price growth.

In addition to lower energy costs, inflation in France was restrained by falling prices for manufactured goods, particularly clothing and footwear, reflecting a longer winter sales period compared with last year.

By Sabina Mammadli