French inflation slowed more than expected in September, INSEE says

(Reuters) - French consumer prices fell more than initially expected in September, the INSEE statistics agency said on Tuesday, revising the headline annual consumer price index to 1.4%, strengthening the case for a possible ECB rate cut this week.

EU-harmonised year-on-year inflation in the bloc's second-biggest economy reached its lowest level since early 2021, down from 2.2% in August. The INSEE had initially forecast a September reading of 1.5%.

Price growth across the euro zone has been above the European Central Bank's target for years now with surging energy costs, production bottlenecks in the post pandemic reopening, corporate opportunism and copious fiscal support.

But a record string of interest rate hikes from the central bank has tamed price growth relatively quickly, and policymakers are now debating just how fast they should ease borrowing costs.

The ECB has already lowered rates twice this year and a cut to the 3.5% deposit rate on Oct. 17 is almost fully priced in by financial markets, indicating investors expect the bank to accelerate the pace of policy easing.

(Reporting by Michal Aleksandrowicz; Editing by Andrew Heavens and Tassilo Hummel)

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