February 2025 signalled a significant cooling in inflation, with the CPI remaining stable month-over-month after a modest 0.2 percent increase in January. The year-over-year inflation rate dropped sharply to 0.8 percent, marking the first time since February 2021 that it fell below 1 percent. Following a regulatory tariff reduction, this substantial decline was largely driven by a sharp 5.8 percent drop in energy prices, particularly electricity prices (minus 12.6 percent).

While energy prices plummeted, service prices continued to rise (2.2 percent year-over-year), though slower than in January. Catering (2.2 percent) and accommodation services (6.0 percent) remained notable contributors to inflation, while insurance and health services saw a modest slowdown. Transport prices increased by 1.5 percent, but airfare declines (minus 0.1 percent) tempered the overall trend.

Manufactured goods prices remained stable year-over-year, indicating subdued demand and easing cost pressures. Meanwhile, food prices accelerated slightly (0.3 percent), with fresh vegetables rebounding (2.7 percent), although fresh fish and fruit price growth slowed.

The report highlights a shifting inflationary landscape; energy deflation provides relief, but underlying cost pressures in services and food suggest the economy is still adjusting to new price dynamics. The latest update leaves the French RPI at minus 14 and the RPI-P at minus 10. This means that economic activities remain slightly behind market expectations of the French economy.

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.