French inflation cools to 2% as energy prices ease

France’s inflation cooled to 2.0% in June, the first slowdown this year, as falling energy prices pulled the harmonized consumer-price rate back to the European Central Bank’s target. INSEE’s preliminary estimate put inflation below the 2.8% reading in May and under the 2.3% forecast in Reuters’ analyst poll, a shift that points to a softer price backdrop after months of stickier readings.

The improvement was driven primarily by energy, which had been pushed higher after the U.S.-Iran conflict lifted fuel markets. INSEE’s wider price dashboard showed consumer prices rising 1.8% year on year in June, after 2.4% in May, underscoring how quickly the energy spike reversed. Services inflation also eased, slipping to 1.8% from 2.1%, while manufactured goods prices fell for a third straight month, deepening to minus 0.9% from minus 0.6%.

That mix matters because it suggests France’s inflation slowdown was not just a narrow energy effect. A softer services reading and a deeper decline in manufactured goods prices point to broader cooling in the cost environment, even if households are still unlikely to feel equal relief across rent, food and utility bills. France has already seen inflation fall from above 6% at the start of 2023 to below 1% in February 2025, and INSEE has said the country has generally run inflation significantly below other European economies for more than a year.

The June data also gave policymakers in Frankfurt more room to argue that inflation is heading the right way, even if it is not settled. The European Central Bank raised its three key interest rates by 25 basis points on June 11 and said it remained committed to its 2% medium-term target, while warning that inflation pressures from the war in the Middle East could keep prices elevated in the short term. The ECB’s latest projections put euro-area headline inflation at 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028.

In Paris, the Banque de France sounded a more cautious note. Its June macroeconomic projections lifted France’s 2026 inflation forecast to 2.5%, with inflation excluding energy and food seen at 1.6% in 2026, 2.1% in 2027 and 1.8% in 2028. In a June 18 survey, the central bank said businesses perceived inflation at 2.3% in the second quarter, expected 2.5% over the next year and saw it steady at 2.0% over three to five years, a reminder that the path back to stability still depends heavily on energy markets and wage pressures.