PARIS, Jan 4, Reuters - The current inflation spike in France and the broader euro zone is close to peaking, while the latest wave of COVID 19 infections in France will have a limited impact on the economy, the head of the French central bank said on Tuesday.
Like many economies, France saw an increase in inflation over the last year as demand for goods and services snapped back after the COVID 19 crisis, snarling business supply chains and driving up energy prices.
The national statistics office INSEE said earlier on Tuesday that inflation remained unchanged in December from November at a 13 year high of 3.4% after months of steadily climbing, according to preliminary EU-harmonised data.
Inflation is nearing its peak in our country in December, showing first signs of stabilisation and in the euro area, said Francois Villeroy de Galhau, Bank of France governor in a New Year's address released on the central bank's website.
We believe that supply difficulties and energy pressures should gradually subside over the course of the year, and that we remain very vigilant. The central bank forecast last month that inflation would drop from a peak at around 3.5% at the end of 2021 to less than 2% at the end of 2022, according to its quarterly outlook.
It also predicted that the euro zone's second-biggest economy would see growth moderate this year, to 3.6% from 6.7% predicted for last year.
Since the central bank forecasts, France has seen a record resurgence of COVID infections in its fifth wave, forcing the government to tighten health restrictions.
Villeroy said he was confident that the economic impact would be muted as there had been diminishing fallout with each wave.
He said that even if tighter health restrictions were to return this year and reduce average growth, any such effect would be fully offset by additional growth in 2023.