French Consumer Prices Fall

(Reuters) – French consumer prices fell more than initially expected in September, according to the INSEE statistics agency, revising the headline annual consumer price index to 1.4%. This strengthens the case for a possible ECB rate cut this week.

EU-harmonised year-on-year inflation in the bloc's second-biggest economy reached its lowest level since early 2021, down from 2.2% in August. The INSEE had initially forecast a September reading of 1.5%.

Price growth across the euro zone has been above the European Central Bank's target for years, driven by surging energy costs, production bottlenecks from the post-pandemic reopening, corporate opportunism, and substantial fiscal support.

However, a record string of interest rate hikes from the central bank has quickly tamed price growth, and policymakers are now debating the speed at which to ease borrowing costs.

The ECB has already lowered rates twice this year, and a cut to the 3.5% deposit rate on Oct. 17 is almost fully priced in by financial markets, signaling that investors expect the bank to accelerate the pace of policy easing.