Spain’s inflation rate cooled more-than-expected in March, reaching its lowest level since July 2021 amid falling energy prices.
The figures serve as a preview of next Friday’s broader euro-zone inflation report and will be closely watched by markets.
Spain’s statistics agency said consumer prices were 3.1% higher than a year earlier, a big drop from the 6% inflation rate recorded in February and lower than the 4.2% forecast by economists polled last week became.
That sounds like a big relief, but reflects in part favorable comparisons from a year ago, when Russia’s invasion of Ukraine pushed up energy prices.
Dig deeper and there are still worries. Spain’s inflation measure, which excludes volatile items such as energy and food, remained elevated but fell to 7.5% from 7.6%.
“This shows that despite the sharp fall in headline inflation, inflationary pressures in the economy remain very high,” wrote Wouter Thierie, an economist at ING Bank, in a note to clients.
ECB policymakers are more focused on the core metric as an indication of whether the six rate hikes they have implemented since July are cooling inflation as they better reflect the supply and demand balance in the eurozone economy.
European borrowing costs were broadly stable on Thursday. Two-year Spanish government bond yields recently fluctuated around 2.87%.