French inflation keeps pushing rates up: the rise reaches the accounts through variable-rate debt, on the date written in the contract
30 September 2026, 09:46
This morning INSEE, the French statistics office, published its first estimate for September: in France consumer prices have risen by 3 per cent in a year, against 2.4 in August. The push comes from energy, which costs 21.2 per cent more than a year ago.
France is the second-largest economy in the euro area, and according to Bloomberg the figure keeps up the pressure on the European Central Bank to go on raising rates. The ECB has already raised them twice in 2026, on 11 June and on 10 September, a quarter of a point each time: the deposit facility rate, the one that serves as the benchmark, now stands at 2.50 per cent. In its statement of 10 September it wrote that inflation "is set to remain well above target for an extended period". The next meeting is on 29 October.
For anyone running a business there is only one question: when, and on which debts, all this becomes a cost. The answer is not in the statements from Frankfurt. It is in the loan agreements already signed.
The rate written into contracts moves before the ECB does
Variable-rate loans do not follow the ECB's rate. They follow Euribor: the average of the rates at which the main European banks lend money to one another, calculated every working day. The contract says which Euribor applies, usually the one-month, three-month or six-month rate, and adds the spread, a fixed mark-up agreed at signing.
Euribor does not wait for the meetings. Anyone lending money for three months prices in the rises expected over those three months. At the beginning of January three-month Euribor stood at 2.03 per cent. In May, before the ECB's first rise had even happened, it was already around 2.2. At the end of September it is around 2.6. By the time the ECB announces, a good part of the increase is already inside the rate that contracts use.
The instalment goes up on the reset date, not on the day of the announcement
The rise enters a business through three doors, and not at the same moment.
A fixed-rate loan does not change: the instalment stays the same, from the first to the last. It is like an energy bill on a fixed-price tariff: as long as the contract lasts the increase is not seen, and it turns up all at once at the next signing. A fixed rate does not cancel the rise: it postpones it to the next loan.
A variable-rate loan changes on the reset date written in the contract: every month, every three months or every six, depending on the Euribor chosen. On that day the bank reads Euribor and recalculates the interest on the next instalment. Between one reset and the next the instalment stays put, whatever the ECB decides.
Then there are the short-term lines, the overdraft facility and invoice advances. There too the rate is normally tied to Euribor, but there is no instalment to give warning: interest is calculated on the amount drawn, and it grows as soon as the contract updates the rate. It is the increase that gets noticed least, because it arrives inside the bank statement.
Half a point is counted in euros before it is counted in percentages
An example. A business that makes packaging has two million euros of variable-rate debt. Half a point more, which is what the ECB's two rises add up to, means €10,000 more in interest a year.
The whole sum is here: the variable-rate debt, multiplied by the rise. Fixed-rate debt stays out of it, and that is why the same ECB decision costs very different amounts to two businesses with the same total debt.
The rise weighs where cash only just covers the instalments
Ten thousand euros, for a business with that much debt, may seem little, and often it is. What matters is which cash it comes out of. Banks look at the DSCR (Debt Service Coverage Ratio), the ratio between the resources the business generates in a year and what goes out in the same year in interest and capital repayments on its loans, and as a rule they want it to be at least 1.2. When interest goes up that ratio goes down, even if the business has not borrowed one euro more. Those well above the threshold do not notice. Those who were only just above it find themselves below without having decided anything.
To know in advance, one sheet is enough, with three columns for each loan: how much is left to repay, whether the rate is fixed or variable, the date of the next reset. With those three columns the cash forecast for the next six months can already carry the recalculated instalments, before the bank recalculates them.
The dates on which the ECB decides are public, and everyone watches them. The date on which that decision becomes a higher instalment is written in the loan agreement, and as a rule nobody looks at it.
This article was prompted by a news item published in Bloomberg.