France's final October inflation readings confirmed a further acceleration in price pressures at the start of the final quarter of the year, according to final consumer price data from France's national statistics office (INSEE).

Key figures

• October final CPI: +3.4% year-on-year, in line with the preliminary estimate of +3.4% and up from +3.1% in the prior month
• October final HICP: +3.7% year-on-year, slightly below the preliminary estimate of +3.8% but ahead of the prior +3.4%

The harmonized index of consumer prices (HICP) is the inflation measure tracked by the European Central Bank for its policy assessment. Unlike the national CPI, it is compiled to be directly comparable across European Union member states, giving the ECB a consistent read on price pressures throughout the currency bloc.

Energy drives the acceleration

The stronger readings owed much to another jump in energy prices, which climbed a further 1.9% on the month and stood 24.1% higher than in October last year. That marks another step up in the annual pace, following increases of +16.7% in August and +21.3% in September. Energy is typically among the most volatile components of the consumer price basket, and its outsized swings are feeding directly into France's headline rate — one reason officials and analysts separate core measures when judging how entrenched price pressures have become.

Core and services pressures firm

Underlying price pressures also picked up. Core annual inflation rose to 1.7% in October from 1.5% in September, while services inflation continued its climb, moving to 2.6% from 2.4% in September and 1.9% in August. Those are the categories that tend to draw the closest scrutiny, since stripping out volatile items such as energy gives a cleaner read on how broad-based inflation has become.

An awkward backdrop for policymakers

The figures reaffirm that price pressures in Europe's second-largest economy — second only to Germany — are continuing to intensify, and at a rather awkward time. With French growth conditions struggling and fiscal risks mounting, policymakers face an untimely backdrop of firmer inflation alongside weakening economic activity and budgetary uncertainty.

The ECB targets inflation of 2% over the medium term, and the report will keep ECB policymakers on their toes as they navigate the next steps. For now, the data reinforce expectations of another rate hike in December, with markets currently pricing in roughly 82% odds of such a move. And because the final figures broadly confirm the preliminary estimates, there is little statistical uncertainty over the inflation picture heading into that meeting — leaving the state of the French economy and public finances among the key considerations policymakers will weigh between now and then.

Source: ForexLive