French inflation slows to 0.8% in December 2025 as energy declines

General Slowdown Marked by Decline in Energy Prices

Consumer prices rose by 0.8% year-on-year in December 2025, compared to 0.9% the previous month, according to Insee's preliminary estimate. This drop is mainly driven by a further decline in energy prices, which stood at -6.8% year-on-year, following a -4.6% in November.
Petroleum products have largely contributed to this correction, in a calmer international market. However, on a monthly basis, the price index rebounded by 0.1%, after a 0.2% decrease in November, influenced by the seasonal effect of services like transportation. The harmonized index of consumer prices (HICP), monitored by the ECB, stood at 0.7% year-on-year, marking the second lowest in the European Union.
François Villeroy de Galhau, Governor of the Bank of France, welcomed this level: « This low inflation figure is good news for real wages, purchasing power in France, and for maintaining favorable interest rates. » Manufactured goods continue their moderate deflation, at -0.4% year-on-year. These developments reflect a persistent disinflation since the fall, far from the peaks seen post-Ukraine conflict. The final figures will be released on January 15. For investors, this scenario suggests a stabilization of costs, beneficial for diversified portfolios.

Food and services offset the trend

If energy slows inflation, other areas are moving in the opposite direction. Food prices are accelerating, up 1.7% year-on-year compared to 1.4% in November, driven by fresh products. This surge raises questions about the resilience of supply chains in the face of climatic and logistical challenges. Services maintain a steady pace at 2.2% year-on-year, boosted by recurring components. Tobacco remains unchanged at 4.1%.
In the eurozone, overall inflation estimated by Eurostat fell to 2% in December from 2.1% in November, with energy at -1.9% and services at 3.4%. In France, this 0.7% HICP positions the country among the most restrained. The ECB, which kept its benchmark rate at 2% in December for the fourth time, is observing these trends to calibrate its policy. The central bank's projections forecast 1.9% in 2026 and 1.8% in 2027 in the eurozone. For households and businesses, this rise in food prices strains budgets, prompting vigilance regarding agricultural production indices. Investors in French government bonds might benefit from this overall moderation.

Outlook for 2026 and Strategic Implications

The slowdown to 0.8% confirms a calming trend, supported by falling energy prices but tempered by rising food costs. The Harmonized Index of Consumer Prices (HICP) at 0.7% strengthens France's standing in Europe. With the European Central Bank holding steady at 2%, interest rates remain favorable, preserving purchasing power and real wages. Services and tobacco, which remain consistently high, highlight structural pressures, while a 0.4% decline in manufactured goods signals increased competition. In the eurozone, inflation at 2% with energy at -1.9% and food at 2.6% shapes a well-managed environment.