French inflation cools below 2% in June, easing ECB pressure

French headline inflation eased to below 2% in June, according to preliminary data released Tuesday, marking a significant cooling from previous months and providing relief for the European Central Bank.

The annual inflation rate fell to 1.9% from 2.3% in May, driven by a sharp decline in energy prices, which dropped 11.2% year-on-year compared to a 16.6% rise in May. Food price inflation also moderated to 0.9% from 1.1%, while services inflation eased to 1.8% from 2.1%. The broad-based slowdown suggests that price pressures are abating across the economy.

For interest rate traders, the data reduces the urgency for the ECB to act at its July meeting. The central bank has been grappling with persistent inflation, but the French figures, along with similar trends in other eurozone economies, could allow policymakers to hold rates steady and wait for more data after the summer. NowPrice's real-time rates tracker shows the eurozone swap curve steepening slightly on the news, reflecting reduced expectations for a near-term hike.

Looking ahead, traders will focus on eurozone-wide inflation data due later this week, as well as the ECB's July policy decision. If the disinflation trend broadens, the central bank may maintain its current stance, keeping rates unchanged through the summer. However, services inflation remains above target, so the ECB will likely remain cautious before declaring victory over inflation.