France’s preliminary CPI for July increased by 1.0% year-on-year, matching expectations. The previous figure also stood at +1.0%.
The Harmonised Index of Consumer Prices (HICP) rose by 0.9% year-on-year, surpassing the anticipated 0.8%. The prior HICP reading was also +0.9%.
Service Price Inflation
Service price inflation remains a noticeable concern, though the overall data is not expected to influence the European Central Bank’s current outlook.
This French inflation number doesn’t change the big picture, but it does confirm what we’ve been watching closely. Services prices are refusing to cool down, which is a key issue for the European Central Bank. The overall number was expected, so there is no immediate shock to the market.
Looking back, this fits the pattern from the June 2025 Eurozone inflation data, which came in at 2.3% and prompted the ECB to pause its rate-cutting cycle. Germany’s preliminary July inflation also just printed at a stubborn 2.5%, reinforcing the idea that the fight isn’t over. The ECB, which holds its deposit rate at 2.75%, is likely stuck for now and will watch to see if this trend continues into the August data release.
Implications On Interest Rate Markets
For interest rate markets, this means the chance of an ECB rate cut in September is probably getting smaller. We should expect short-term rate futures, like the December 2025 €STR futures, to edge slightly lower as traders price out further easing. This reinforces a “higher for longer” rates view for the rest of the year.
This persistent inflation gives the Euro some support against currencies like the US dollar, where the Federal Reserve is signaling a more stable policy outlook. We could see traders buying short-term call options on the EUR/USD to position for a potential grind higher. The market may have gotten too comfortable pricing in ECB cuts that are not coming as quickly as hoped.
For equities, this is not great news as stubborn inflation and higher rates can squeeze company profits. We might consider buying protective puts on the Euro Stoxx 50 index as a hedge against a market pullback. The memory of the high inflation we saw back in 2022 and 2023 means any sign of its return will make investors nervous.
