Inflation in France has fallen to its lowest point since July 2021, strengthening the argument for the European Central Bank to persist in lowering interest rates following similar slowdowns in Germany and Spain.

According to statistics agency Insee on Friday, consumer prices in the eurozone's second-largest economy increased by 2.2% in August compared to a year ago, down from a 2.7% rise in July. Economists surveyed by Bloomberg had predicted a 2.1% increase.

The reports come just under two weeks before policymakers convene in Frankfurt to determine if the easing inflation is enough to justify further reducing borrowing costs after an initial cut in June, Bloomberg reports.

Investors anticipate that recent price trends, combined with sluggish economic growth, will lead the ECB to lower its deposit rate from 3.75% to 3.5%.

However, some rate-setters have cautioned that data this year may be volatile, and the ECB needs to consider underlying trends, especially in the services sector, rather than just the headline figures.

This latest inflation report raised concerns as it revealed an acceleration in services inflation, rising to 3.1% from 2.6% in July.

Despite the overall slowdown in French prices, this could offer President Emmanuel Macron some relief. Earlier in the summer, opposition parties had pressured him during snap elections to take more action to address the increasing cost of living.

The vote resulted in a hung parliament, leaving President Macron consulting to find a new prime minister with enough cross-party support to govern.

In a further boost for Macron, separate data from Insee on Friday indicated a rebound in consumer spending in July, which rose by 0.3% after a 0.6% decline in June.

Nevertheless, the statistics agency revised its reading for Q2 economic growth down to 0.2% from 0.3%. Both investment and the contribution from foreign trade were slightly lower than previously reported.