The January 2025 consumer price index report reflects a nuanced economic landscape, marked by both moderate annual inflation and short-term price fluctuations. Year-over-year, the CPI rose by 1.4 percent, slightly higher than December's 1.3 percent and 0.1 percentage points below the expected rise, driven by rising energy and manufactured goods prices. However, this increase is tempered by stable food prices and a slower rise in service and tobacco prices, suggesting muted consumer demand in certain sectors.

On a monthly basis, the 0.1 percent decline in consumer prices contrasts with the 0.2 percent increase in December 2024, highlighting the impact of seasonal retail dynamics. The winter sales period led to lower clothing and footwear prices, while transport costs also fell, contributing to the overall price decline. However, insurance, energy, food, and tobacco prices rose, hinting at underlying cost pressures that could persist in the coming months.

Meanwhile, the harmonised index of consumer prices -a key metric for European comparisons-remains stable at 1.8 percent year-over-year, with a 0.2 percent monthly decline mirroring domestic trends. The latest data takes the French RPI to minus 7 and the RPI-P to 7. This means that economic activities are generally in line with market estimations.

Headline CPI is expected up 1.5 percent from a year ago versus 1.3 percent in December.

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.

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.