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France.. Energy prices push inflation to a historic level

The National Institute of Statistics stated that inflation is driven by the rise in energy and food prices, which rose by 33.1 percent and 5.7 percent, respectively, compared to June 2021.

On a monthly basis, the French consumer price index (inflation) increased by 0.7 percent in June, as in the previous month and after 0.4 percent in April.

According to the statement issued by the National Institute of Statistics, “energy prices will accelerate significantly in line with the prices of petroleum products.”

The European Central Bank is expected to raise interest rates in July for the first time in nearly a decade in a bid to contain spiraling inflation. Economists are divided over the size of the increase, amid concerns that a higher borrowing rate could further weaken the economy.

Services prices rose in June by 3.2 percent year on year, at the same pace recorded last month, while prices for manufactured goods slowed to 2.6 percent, compared to 3.0 percent in May.

Finally, the harmonized consumer price index, which serves as a tool for European comparisons, rose in June by 6.5 percent on an annual basis, compared to 5.8 percent in May.

While German inflation has not been as strong as expected this month, European Central Bank President Christine Lagarde said the main focus will now be on the figure for the entire 19-nation Eurozone, due for release on Friday. Inflation is expected to record a historic high of 8.5%.

Although France has managed to contain inflation compared to other European countries, the government has spent about 25 billion euros (about 26.1 billion dollars) to curb the rise in energy prices.

The French president’s government also plans to present a revised budget for 2022 that includes another 25 billion euros to prolong existing measures and add new measures, such as an increase in pensions.

For its part, the French Central expected that the country’s economy will slow by more than estimates this year due to the current energy price shock.

The French central added in its quarterly forecasts that the second largest economy in the euro zone is expected to grow by 2.3 percent this year before slowing to 1.2 percent in 2023 and then rising to 1.7 percent in 2024 as the repercussions of the crisis recede.

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