Inflation in France cools to a two-year low in January, shaping euro area outlook

France’s inflation rate for January surprised many and slipped to its lowest level in more than two years, signaling a softer price path for the euro area’s second-largest economy. Early estimates pointed to a continued cooling trend, and the final reading confirmed a meaningful pullback from the December figure. Analysts at Bloomberg noted that the decline brings January inflation to about 3.4 percent, a marked improvement from the 4.1 percent recorded at the end of last year. This reading sits comfortably below Bloomberg’s consensus estimate of around 3.6 percent and well off the 7.3 percent peak observed in February 2023, underscoring a broad-based moderation rather than a one-off dip driven by a single commodity. The shift echoes the consumer price dynamics seen across the bloc, where energy, food, and industrial goods prices have been easing gradually as supply chains normalize and demand cools in the wake of tightening monetary conditions. In France, the decline in these key components has translated into a more forgiving inflation path, suggesting households may have a bit more room to adjust budgets without eroding purchasing power too rapidly, a development that policymakers will scrutinize as they map the next steps.