Energy prices soar! France's inflation climbs steadily in August.

On Thursday,Is MT4 platform legal in China data from the French National Institute of Statistics and Economic Studies (INSEE) showed that France's harmonized CPI annual rate for August rose by 5.7%, not only higher than the economists' general expectation of 5.4% but also significantly above July's 5.1%. The preliminary value of the harmonized CPI monthly rate in August increased by 1.1%, also surpassing the market expectation of 0.9%.

The data also revealed that food prices in France increased by 11.1% in August, below July's 12.7%. Energy prices climbed by 6.8%, a sharp rise from July's 3.7% drop. Although the decrease in food inflation is good news for the French government, the sharp increase in energy prices in August propelled the overall inflation rate to rise rapidly.

Moreover, despite a slight decline in food prices last month, the latest data shows that food inflation remains about twice the overall inflation rate. The high food prices not only burden consumers but also intensify conflicts between retailers and consumer goods groups. Following a meeting with major retailers, French Finance Minister Bruno Le Maire will hold discussions with industrial suppliers to explore ways to accelerate the pace of price reductions.

INSEE stated that energy prices are still a major driver of inflation in France, influenced by factors such as the Russo-Ukrainian conflict, control over energy production, and strikes in Australia. This implies that key energy prices, such as crude oil and natural gas, may continue to remain high, which will make it difficult for France's inflation pressure to show signs of improvement in the short term.

More importantly, the acceleration of inflation in France will significantly increase the difficulty of adjusting monetary policy for the European Central Bank. While the lifting of COVID-19 containment measures has allowed the French economy to maintain moderate growth, the German economy is gradually showing signs of recession, dragged down by structural issues and weak global demand. The contradiction between high inflation in France and economic weakness in Germany limits the European Central Bank's future monetary policy maneuverability, making it challenging to control inflation in France while promoting economic growth in Germany.

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