Spain’s inflation falls more than expected to 2.9%

Spain’s inflation fell to 2.9 percent, its lowest level for nearly two years, raising hopes that price pressures across the eurozone will ease quickly.

Economists said the larger-than-expected decline was good news for the European Central Bank, suggesting that inflation data for the rest of the eurozone published later this week could show a sharp decline in inflation across the region.

However, Spain already had one of the lowest rates of inflation in Europe before the latest data, and economists said it could take longer for a similar cooling off of price pressures occurring elsewhere in the region.

Annual consumer price growth in Spain slowed to 3.8 percent in April, a much bigger drop than the 3.4 percent forecast by economists in a Reuters poll.

from Spain statistics office said The main factor pushing down inflation was the fall in fuel prices. It added that slower growth in food and non-alcoholic beverage prices also “played a role, although to a lesser extent”.

Spain’s ruling socialists, led by Prime Minister Pedro Sánchez, sought to take credit for Spain’s relatively low inflation, linking it to government energy policies aimed at mitigating the effects of high gas prices. But the disastrous results of local and regional elections on Sunday showed the message did not resonate with voters.

As the Socialists lost control of large swathes of the country to the conservative People’s Party, discontent over Sánchez’s political alliances outweighed any notion that the prime minister had successfully steered the economy through a series of crises.

Following the release of Spanish inflation data on Tuesday, eurozone bond markets rose and the euro fell against the dollar as investors bet that inflation in the bloc could fall faster than expected and that fewer rate hikes by the ECB are needed. .

But bond prices later fell back and the euro improved, as economists said the pace at which Spanish price pressures were cooling off could not be matched by the rest of Europe.

“I don’t think we can read much into the broader eurozone data from today’s Spanish numbers, although they are good news in themselves,” said Claus Wiestesen, an economist at research group Pantheon Economics.

After excluding energy and unprocessed food, inflation in Spain fell from 6.6 percent to 6.1 percent, according to Andrew Cunningham, an economist at the research group Capital Economics – which suggests that underlying price pressures were still “relatively high”.

He said the structure of Spain’s electricity market meant that any changes in wholesale energy costs were transferred to consumer prices faster than in most of Europe.

Eurozone inflation is expected to fall from 7 percent in April to 6.3 percent in May, according to a Reuters poll of economists when the figures come out on Thursday.

But the ECB is focusing on core prices – excluding energy and food – which policymakers have said they want to see a steady decline towards their 2 per cent target before stopping to raise rates. Core prices in the eurozone are expected to fall by only 5.5 percent in May.

Spain’s inflation fell to 2.9 percent, its lowest level for nearly two years, raising hopes that price pressures across the eurozone will ease quickly.

Economists said the larger-than-expected decline was good news for the European Central Bank, suggesting that inflation data for the rest of the eurozone published later this week could show a sharp decline in inflation across the region.

However, Spain already had one of the lowest rates of inflation in Europe before the latest data, and economists said it could take longer for a similar cooling off of price pressures occurring elsewhere in the region.

Annual consumer price growth in Spain slowed to 3.8 percent in April, a much bigger drop than the 3.4 percent forecast by economists in a Reuters poll.

from Spain statistics office said The main factor pushing down inflation was the fall in fuel prices. It added that slower growth in food and non-alcoholic beverage prices also “played a role, although to a lesser extent”.

Spain’s ruling socialists, led by Prime Minister Pedro Sánchez, sought to take credit for Spain’s relatively low inflation, linking it to government energy policies aimed at mitigating the effects of high gas prices. But the disastrous results of local and regional elections on Sunday showed the message did not resonate with voters.

As the Socialists lost control of large swathes of the country to the conservative People’s Party, discontent over Sánchez’s political alliances outweighed any notion that the prime minister had successfully steered the economy through a series of crises.

Following the release of Spanish inflation data on Tuesday, eurozone bond markets rose and the euro fell against the dollar as investors bet that inflation in the bloc could fall faster than expected and that fewer rate hikes by the ECB are needed. .

But bond prices later fell back and the euro improved, as economists said the pace at which Spanish price pressures were cooling off could not be matched by the rest of Europe.

“I don’t think we can read much into the broader eurozone data from today’s Spanish numbers, although they are good news in themselves,” said Claus Wiestesen, an economist at research group Pantheon Economics.

After excluding energy and unprocessed food, inflation in Spain fell from 6.6 percent to 6.1 percent, according to Andrew Cunningham, an economist at the research group Capital Economics – which suggests that underlying price pressures were still “relatively high”.

He said the structure of Spain’s electricity market meant that any changes in wholesale energy costs were transferred to consumer prices faster than in most of Europe.

Eurozone inflation is expected to fall from 7 percent in April to 6.3 percent in May, according to a Reuters poll of economists when the figures come out on Thursday.

But the ECB is focusing on core prices – excluding energy and food – which policymakers have said they want to see a steady decline towards their 2 per cent target before stopping to raise rates. Core prices in the eurozone are expected to fall by only 5.5 percent in May.