French inflation falls to ECB’s 2% target, snapping five-month rise

Consumer price growth in France pulled back sharply in June, snapping five months of acceleration and offering the first sign that the energy shock tied to the Iran conflict may be losing momentum in the eurozone's second-largest economy.

Preliminary data released Tuesday by France's national statistics agency INSEE showed the harmonised consumer price index rose 2.0% year-on-year in June, down from 2.8% in May and in line with the European Central Bank's target, according to a Reuters report. The reading marked the first decline in French inflation since the start of the year, when prices began climbing following the closure of the Strait of Hormuz in March.indexbox+1

Services inflation also moderated, falling to 1.8% from 2.1% in May, while manufactured goods prices deepened their decline to -0.9% from -0.6%.indexbox

Spain Holds Steady

Across the Pyrenees, Spain's annual inflation rate remained unchanged at 3.2% in June, matching readings in both May and April, according to flash data from the National Statistics Institute. Core inflation edged down one-tenth of a percentage point to 2.9%. The EU-harmonised rate for Spain held at 3.6%, unchanged from the prior month.tradingeconomics+3

The Wall Street Journal News Corp ↗ 2.28% reported that the Spanish reading was stronger than economists had expected, suggesting that price pressures in the country are proving more persistent.wsj

Eurozone Data Due Wednesday

The French and Spanish releases are the first national readings ahead of Eurostat's eurozone-wide flash estimate for June, due Wednesday. In May, headline inflation across the bloc stood at 3.2%, with energy costs up 10.9% year-on-year, the sharpest gain since early 2023.tradingeconomics+1

The ECB's June staff projections forecast average eurozone inflation of 3.0% for 2026 as a whole, before easing to 2.3% in 2027. The central bank raised interest rates at its June 11 meeting, with executive board member Isabel Schnabel telling Reuters beforehand that a hike was needed given the energy shock's broadening impact on prices.global.morningstar+1

France's retreat to the ECB's 2% target will be closely watched as policymakers weigh whether the worst of the Iran-related energy pass-through has peaked or whether further tightening lies ahead.