Lagarde Expects French Inflation to Slow Starting in August

By Francois de Beaupuy

July 17 (Bloomberg) -- French Finance Minister Christine Lagarde said inflation will remain ``quite high'' in July and start slowing from August, reflecting lower monthly price increases compared with last year.

French consumer prices climbed an annual 4 percent, from 3.7 percent in May, based on the European Union-harmonized method, Insee, the national statistics bureau, said yesterday in Paris. The inflation rate is the highest since Insee began reporting the data in 1996.

``I think we'll have a drop in inflation from August,'' Lagarde said on LCI television today. ``We'll finish the year at a clearly lower rate.''

Faster inflation is making it difficult for the European Central Bank to cut borrowing costs even as growth slows across the region's economy. The ECB raised its key rate by a quarter point to 4.25 percent this month, adding to constraints on companies already feeling the pressure of a record-high euro.

``Inflation is rising in all countries'' of the world, whether monetary policy is ``very rigorous'' or lax, Lagarde said. ``It's an inflation which results from rising oil and raw material prices,'' so ``I'm not sure that there's such a marked link between inflation and interest rates.''

ECB President Jean-Claude Trichet said last week he has ``no bias'' from now on, adding that the bank isn't ``pre-committed and will do what is necessary to ensure price stability.''

``I'm half satisfied by the statement'' of Trichet who has said he's not considering a series of rate increases, Lagarde said today.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.