France’s 2025 budget; two-way risk for energy prices

Having survived a vote of no confidence earlier in the week, France’s government presented its 2025 budget on Thursday, which highlighted the perilous state of the public finances. Meanwhile, energy prices have been on a rollercoaster ride this week and remain much higher than at the start of the month, but we doubt that policymakers will be concerned by the moves so far. And even if prices rose further, the risk of second-round effects pushing core inflation up significantly are probably lower than they were during the 2022 energy shock. Next week, the ECB looks certain to cut interest rates by 25bp and we expect it to cut at each of the three meetings after that.

We will discuss the outlook for ECB policy and the euro-zone economy in a 20-minute online briefing shortly after next week’s press conference, at 3pm BST. You can register here.