Falling French inflation boosts hopes of an end to eurozone rate rises
German bonds rally and euro falls against dollar as investors see ‘clear signs of disinflation’ in Europe
Annual inflation in France fell to 6 per cent, its lowest level for a year, boosting hopes that a swift easing of eurozone price pressures will allow monetary policymakers to stop raising interest rates soon.
Coupled with falling German regional inflation and Spanish price growth also dropping more than forecast to almost a two-year low, the decline in French inflation in May lifted economists’ expectations that the European Central Bank may stop increasing rates by July.
Investors responded by scaling back their bets on how much higher the ECB will raise rates. Germany’s rate-sensitive two-year bonds rallied, while the euro fell 0.6 per cent against the dollar to $1.0675, its lowest level for more than two months.