Energy ebb, winter promotions extended: France's January inflation unexpectedly fell to 0.4%, hitting a five-year low.

The inflation rate in France unexpectedly fell to the lowest level in five years, still far below the European Central Bank's target of 2%, largely benefiting from the drop in energy prices. Data released by the French National Institute of Statistics and Economic Studies (Insee) showed that consumer prices rose by 0.4% year-on-year in January, compared to a 0.7% increase in the previous month. This increase was lower than the median estimate of 0.6% from a survey of 20 analysts, with only one analyst predicting this result, making it the weakest performance since December 2020. Among the major economies in the eurozone, France's inflation rate has always seemed out of place. The latest data released on Tuesday is unlikely to worry European Central Bank officials who will be meeting in Frankfurt this week to discuss decisions on borrowing costs. After all, the overall inflation in the eurozone has already reached close to 2%, and based on this situation, it is expected that they will maintain the deposit rate unchanged. In fact, the inflation rates in other countries in the eurozone are closer to the target set by the European Central Bank: Germany's inflation rate last month was 2.1%, while Spain's was 2.4%. Bloomberg economist Jean Darbaba pointed out after analyzing the inflation data for January in France, "The unexpected decline is mainly attributed to some temporary factors. Currently, price increases may have reached the bottom, and subsequent slow recovery is expected under the driving force of electricity-related base effects. However, even with such a rising trend, the latest data still confirm that the overall potential inflationary momentum in France remains very weak. Looking ahead, risks are clearly on a downward trend, mainly reflecting the drag effect of the strong euro." Franois Villeroy de Galhau, the governor of the Bank of France, warned that the downside risks to European prices are at least as significant as upside risks. The recent rebound in the euro may further depress prices. In addition to energy factors, inflation in France in January was also suppressed by prices of manufactured goods, especially clothing and footwear prices, due to the extended winter sales period compared to last year. The increase in service pricesan area that the European Central Bank has always focused onhas slowed to below 2% for the first time in four years.