Spain inflation accelerates for 3rd consecutive month

Spain’s inflation accelerated for a third consecutive month, spurred by the gradual withdrawal of government support to mitigate the energy crisis, which continued to drive prices upwards, Bloomberg reported citing data released on Thursday.

Inflation in May stood at 3.8 per cent compared to the previous year, up from April’s 3.4 per cent and slightly surpassing the median estimate of 3.7 per cent from economists surveyed by Bloomberg.

Core inflation, excluding energy and certain food costs, also saw an increase, rising to 3 per cent from 2.9 per cent.

This trend mirrors a similar uptick in Germany, where the introduction of a low-cost public transport ticket last year contributed to a rise in price growth to 2.8 per cent this month. Data for the entire 20-nation eurozone, scheduled for release on Friday, are also anticipated to show a rise, reaching 2.5 per cent.

Despite these figures, it’s unlikely that the European Central Bank will deviate from its plan to reduce the deposit rate next week, currently at a record high of 4 per cent. However, policymakers remain cautious, foreseeing a return to disinflation throughout 2024 and 2025, and are hesitant to authorise further rate cuts.