French inflation rises to the highest level since August 2024, increasing pressure on the European Central Bank to raise interest rates

As the Iran war drives energy costs soaring, France’s inflation reaches its highest level since August 2024, further increasing pressure on the European Central Bank to tighten monetary policy.

The National Institute of Statistics and Economic Studies (Insee) in France announced on Tuesday that the consumer price index in the eurozone’s second-largest economy rose 1.9% year-on-year in March, up from 1.1% in February. This result is in line with the median forecast from a Bloomberg survey.

After declining for more than a year, energy costs surged 7.3% this month. There are currently no signs that these pressures are rapidly spreading to other sectors, with service sector inflation only slightly rising to 1.7%, and manufactured goods prices decreasing by 0.6% year-on-year.

ECB President Christine Lagarde has pledged to act decisively and swiftly if necessary, but officials also stated they would not rush to raise interest rates. Investors expect at least two rate hikes before the end of the year, with the earliest possible move at the April meeting.

French Central Bank Governor François Villeroy de Galhau said on Monday that while the European Central Bank is ready to take action, discussing specific timing is still “premature.”