Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

Slowing Inflation in France, Spain Fuels Hope of Interest Rate Cuts

Fri 01 Mar 2024 | 04:50 AM
Taarek Refaat

Annual inflation rates slowed in France and Spain in February, official data showed on Thursday, raising speculation about the European Central Bank's (ECB) next move on interest rates.

Consumer prices (CPI) rose by 2.9% in France compared to the same month last year, after recording 3.1% in January, according to the National Institute of Statistics and Economic Studies (Insee).

The annual decline came as the prices of food, manufactured products, and services declined, while energy prices increased.

However, inflation rose by 0.8% between January and February after a monthly decline of 0.2%, according to the institute.

The monthly increase is due to higher prices for services, including rents and transportation, as well as energy, manufactured products, and tobacco.

Spanish economy

In Spain, annual inflation fell to 2.8% in February as electricity prices fell from 3.4% in the previous month.

This data would raise speculation about the ECB's next move at its monetary policy meeting on March 7.

Markets hope that the central bank will soon begin reducing interest rates that were raised to combat inflation that accelerated after the Russian-Ukrainian war in 2022.

Although the Frankfurt-based bank has kept interest rates steady so far in 2024, it is widely expected to begin lowering them later this year in the face of slowing consumer prices and a weak euro zone economy.

French economy

Separate data showed that the performance of the French economy was better than previous estimates in the last three months of 2023, recording growth of 0.1% instead of stagnation.

But the National Institute of Statistics and Economic Studies kept its full-year growth estimate at 0.9%.

Germany will publish inflation data for February on Thursday, while euro zone data will be released on Friday.