French Inflation Stabilizes as Pressure From Energy Prices Eases

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French inflation stabilized in December, indicating price pressures may be near a peak in the euro area after surging on energy costs in the past few months.

The 3.4% year-on-year increase in the euro area's second largest economy was slightly smaller than the 3.5% economists had expected, bucking a trend of recent upward surprises. Data later this week are also expected to show consumer prices eased in Germany and the currency bloc as a whole. 

The strength of inflation gave the European Central Bank more leeway to plot a course out of exceptional monetary stimulus at a meeting last month. The first step decided by policy makers sees net asset purchases under the emergency program ending in March with only a temporary boost to regular bond buying to smooth the exit. 

France's December inflation report on Tuesday showed a slowdown in rising energy costs offsetting an acceleration in food and manufactured goods. Inflation in services slipped slightly to 1.8% from 1.9% in November. 

Even as France shows signs of turning the corner on surging prices, southern European economies are still under pressure. Last week, Spain recorded the highest rate in three decades and figures for Italy due Wednesday are expected to show an acceleration to 4.2% in December.

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