French inflation is seen accelerating again in October, as the preliminary estimates show headline annual inflation climbing to its highest since December 2023. Yowza.
The main culprit is once again energy prices, as that continues to fuel much of the headline price increase. No pun intended. Of note, energy price inflation was up 24.1% annually in October compared to 21.3% in the month before.
The detailed breakdown shows food price inflation softening slightly to 1.2% in October but services inflation is seen picking up further to 2.7% from 2.4% in the month before. The latter is a real issue as it signals that higher energy prices are starting to spill over more broadly, and that will in turn feed into core inflation as well.
It's not a good look if you're the ECB. France is already struggling economically, not to mention with fiscal headwinds growing stronger by the day. And with inflation pressures starting to heat up as well, that is making for a very stagflationary outlook for Europe's second-largest economy.
For the central bank, this is their biggest issue and risk to tightening policy further. That is especially the case as French bonds are also coming under heavy pressure amid fiscal worries and that could threaten to blow over to the rest of the euro area as well.
It's really a case of damned if you do, damned if you don't for the ECB.
This article was written by Justin Low at investinglive.com.
Source: Investing Live - News
