| Consensus | Actual | Previous | |
|---|---|---|---|
| Month over Month | 0.1% | 0.1% | -0.2% |
| Year over Year | 3.7% | 3.7% | 3.5% |
Highlights
French inflation ticked higher in December, according to flash data, but the widely anticipated increase in price pressures is unlikely to quell speculation of an easing in eurozone monetary policy in the coming months.
Consumer prices rose by 0.1 percent, in line with the consensus estimate, after a 0.2 percent decline in November. That takes the annual rate of inflation to 3.7 percent from 3.5 percent in November, also meeting the market forecast.
Energy prices accounted for much of the increase, with the annual rate rising to 5.6 percent from 3.1 percent in November as base effects fell away. Food price inflation while still elevated declined to an annual rate of 7.1 percent from 7.7 percent previously.
Sticky service inflation may raise some eyebrows amongst policy setters, with the annual rate rising to 3.1 percent from 2.8 percent in November. Manufactured goods prices rose by 1.4 percent, down from 1.9 percent previously.
Harmonised inflation, which feeds into Eurozone data due on Friday, declined by 0.1 percent in December after a 0.2 percent decline previously, with the annual rate rising to 4.1 percent from 3.9 percent in November. Eurozone inflation is expected to increase to an annual rate of 3.0 percent in December from 2.4 percent previously.
The increase in December inflation is unlikely to dispel speculation of a rate cut early in the second quarter, particularly with core Eurozone inflation expected to decrease markedly, to 3.4 percent from 3.6 percent.
ECB officials including President Christine Lagarde have insisted that the governing council has yet to even discuss reducing borrowing rates. But that has not prevented market bets on a rate cut coming as soon as April. None of the members of the Bank's executive board are currently scheduled to speak publicly this week, but Spanish Central Bank Governor Pablo Hernandez de Cos stressed that the timing of a policy pivot will depend on incoming data given the current climate of elevated economic uncertainty.
The data take the French RPI to 6 and the RPI-P to 5, meaning the economy is performing broadly in line with expectations.
Consumer prices rose by 0.1 percent, in line with the consensus estimate, after a 0.2 percent decline in November. That takes the annual rate of inflation to 3.7 percent from 3.5 percent in November, also meeting the market forecast.
Energy prices accounted for much of the increase, with the annual rate rising to 5.6 percent from 3.1 percent in November as base effects fell away. Food price inflation while still elevated declined to an annual rate of 7.1 percent from 7.7 percent previously.
Sticky service inflation may raise some eyebrows amongst policy setters, with the annual rate rising to 3.1 percent from 2.8 percent in November. Manufactured goods prices rose by 1.4 percent, down from 1.9 percent previously.
Harmonised inflation, which feeds into Eurozone data due on Friday, declined by 0.1 percent in December after a 0.2 percent decline previously, with the annual rate rising to 4.1 percent from 3.9 percent in November. Eurozone inflation is expected to increase to an annual rate of 3.0 percent in December from 2.4 percent previously.
The increase in December inflation is unlikely to dispel speculation of a rate cut early in the second quarter, particularly with core Eurozone inflation expected to decrease markedly, to 3.4 percent from 3.6 percent.
ECB officials including President Christine Lagarde have insisted that the governing council has yet to even discuss reducing borrowing rates. But that has not prevented market bets on a rate cut coming as soon as April. None of the members of the Bank's executive board are currently scheduled to speak publicly this week, but Spanish Central Bank Governor Pablo Hernandez de Cos stressed that the timing of a policy pivot will depend on incoming data given the current climate of elevated economic uncertainty.
The data take the French RPI to 6 and the RPI-P to 5, meaning the economy is performing broadly in line with expectations.
Market Consensus Before Announcement
Consumer inflation in December is expected to tick up to an annual rate of 3.7 percent from 3.5 percent in November.
Definition
The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI represent the main rates of inflation. The national CPI is released alongside the HICP, Eurostat's harmonized measure of consumer prices. A flash estimate was released for the first time in January 2016 and is now published towards the end of each reference month.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, France's interest rates are set by the European Central Bank.
France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
