French inflation slows more than expected in June as energy costs fall

France's annual inflation slowed more sharply than expected in June, falling to its lowest level since March as energy prices declined, official figures showed Tuesday.

Consumer prices in the euro area's second-largest economy rose 2% year-on-year in June, down from 2.8% in May, according to preliminary data from French statistics agency INSEE.

The reading came below market expectations of 2.3%, signaling a stronger-than-forecast easing in price pressures.

The slowdown was driven mainly by lower energy costs, after oil prices retreated amid easing concerns over Middle East supply disruptions.

Services inflation, closely watched by the European Central Bank for signs of persistent domestic price pressures, also eased to 1.8% in June from 2.1% in May.

Manufactured goods prices remained in negative territory, falling 0.9% from a year earlier after a 0.6% decline in May.

The figures come ahead of euro area-wide inflation data due Wednesday. Economists expect inflation in the currency bloc to ease to 3% in June from 3.2% in May.

The data may provide some relief for the ECB, which raised interest rates earlier this month for the first time since 2023, citing risks that the energy-price shock caused by the Iran conflict could spill over into broader inflation.

Despite the latest moderation in France, ECB officials are still expected to remain cautious, as inflation in the wider euro area remains above the bank's 2% target.