Since 2022, prices have risen faster than incomes for a large portion of French households. The ECB’s monetary policy, by raising its key rates at an unprecedented pace, has helped to slow the rise in food and energy prices. The decline in overall inflation masks a more fragmented reality: prices for services, housing, and health continue to rise, reshaping daily budgetary decisions.
Inflation in services and housing: the pressure not visible in averages
Headlines about the decline in inflation focus on food and energy. These two categories, very visible, have indeed slowed down thanks to the easing of commodity prices and the good availability of agricultural products in certain markets.
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The rise in prices in services tells a different story. Dining, insurance, non-reimbursed medical expenses, subscriptions: these recurring costs continue to increase at a rate higher than the average inflation. For a household that already dedicates the majority of its budget to rent and fixed charges, the persistence of inflation in services compresses the remaining margins of maneuver.
Housing amplifies this phenomenon. Rents in major urban areas have not followed the decline observed in other categories. Homeowners repaying a variable-rate loan, or those looking to borrow today, face monthly payments significantly higher than before 2022. This expense category, which is difficult to compress, largely determines a household’s ability to absorb other price increases.
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To better understand the impacts of inflation and monetary policy on these mechanisms, one must look beyond aggregated indicators and observe how each category of expenditure evolves independently.
Persistently high interest rates: what it changes for mortgage credit and savings
The ECB has raised its key rates to break the inflationary spiral. The mechanism has worked on the prices of goods, but rates remain significantly higher than those of the 2010s. This change in monetary regime is not temporary: central banks signal that a return to rates close to zero is not expected in the short term.
Mortgage credit: a reconfigured market
Borrowing costs significantly more than it did five years ago. A household that could buy an apartment with manageable monthly payments in 2019 now finds itself either excluded from the market or forced to aim for a smaller or more distant property. First-time buyers are the first affected.
Banks, for their part, are applying stricter lending criteria. The maximum debt-to-income ratio and the duration of loans mechanically limit the amount that can be borrowed. Real estate transactions have declined, and prices have not fallen proportionately, creating a blockage in the market.
Precautionary savings: an inverted calculation
Higher rates provide better returns on regulated savings. The Livret A, for example, offers a yield that seemed unthinkable a few years ago. For households with savings capacity, the remuneration of savings becomes a lever for purchasing power.
However, this logic only benefits those who can save. Households whose budgets are consumed by rent, food, and bills have nothing to invest. The differential situation between social categories widens: some capitalize on more favorable savings rates, while others suffer from higher rates on their loans or overdrafts.
Daily budgetary decisions of households by social categories
The reconfiguration of inflation and monetary policy does not affect everyone in the same way. Budgetary decisions differ according to income level, wealth situation, and geographical area.
- Modest households, renters, absorb almost all of their income in non-negotiable expenses (rent, food, energy). Any increase in services or insurance translates into a direct renunciation of care, leisure, or transportation expenses.
- Middle-class homeowners with an ongoing mortgage see their monthly payments weigh more heavily. The trade-off is between maintaining the home, health expenses, and leisure. Vacations and outings are the first items sacrificed.
- Wealthy households benefit from the rise in savings yields and better-paying investments. Their current consumption is less constrained, but their real estate investment projects are hindered by the cost of credit.
The health expense becomes a marker of growing inequality. Excess fees, out-of-pocket expenses for dental prosthetics or optics are increasing. Households under pressure postpone care, leading to heavier deferred costs in the long run.
Monetary policy and the credibility of the ECB: the limits of rate management
The ECB pursues a price stability objective around an inflation target. Its actions have reduced overall inflation, but it has little effect on the structural components of rising service prices. Rents, health costs, and insurance rates respond to cost dynamics (standards, aging, claims) to which the key rate has only limited influence.
Monetary policy alone cannot correct inequalities in exposure to inflation. A household that dedicates half of its income to housing experiences an effective inflation rate much higher than the average index published. Available data does not allow for concluding that the decline in aggregated inflation translates into real relief for the most constrained budgets.
Inflation expectations also play a concrete role. When service companies anticipate sustained inflation, they pass on preventive increases in their rates. This self-sustaining mechanism complicates the return to price stability as perceived by consumers, even if macroeconomic indicators improve.
The gap between measured inflation and perceived inflation remains a blind spot in economic debate. Households do not consume a price index, they pay rent, insurance, and grocery bills. As long as monetary policy is not complemented by targeted measures on the most rigid expense categories, the gap between the discourse on declining inflation and the budgetary reality of households will persist.