Spanish inflation hits three-month high as costs bite into food and gas prices

People gather during a protest to demand higher wages at the Mayor square in Madrid, Spain, Thursday, Nov. 3, 2022.
People gather during a protest to demand higher wages at the Mayor square in Madrid, Spain, Thursday, Nov. 3, 2022. Copyright Manu Fernandez/Copyright 2022 The AP. All rights reserved.
Copyright Manu Fernandez/Copyright 2022 The AP. All rights reserved.
By Indrabati Lahiri
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German inflation, on the other hand, remained at almost three-year lows, as services inflation slowed further.


The Spanish year-on-year inflation report for April 2024 released early on Monday showed a rise of 3.3%,  according to the National Statistics Institute (INE). This was a slight raise from March's 3.2%, as well as being the highest figure in three months. However, it was still below analyst estimates of 3.4%.

The spike in inflation was primarily because of increases in food and gas costs, although falling electricity prices did go some way towards offsetting the effect of rising prices.

Year-on-year core inflation, which does not take into account energy and food prices, due to their inherent volatility, came in at 2.9%, down from 3.3% in March, the lowest figure since January 2022. Month-on-month inflation for April also clocked in at 0.7%, down from 0.8% in the previous month.

Germany’s year-on-year inflation numbers for April were also released on Monday, coming in at 2.2%, according to the Federal Statistical Office. This was the lowest figure since May 2021, although a smidge below analyst expectations of 2.3%. This was mainly due to services inflation slowing down to 3.4% in April, from 3.7% in March.

Energy prices, however, fell at a slower rate this month, down -1.2% against -2.7 in March, as short-term tax cuts on natural gas came to an end. On the other hand, food inflation increased to 0.5% in April from -0.7% in the previous month.

Month-on-month German inflation came in at 0.5% in April, up from 0.4% in March.

Could the ECB cut interest rates this summer?

Both the Spanish and German economies have been battered in the last few months by persistently high interest rates, as well as the cost of living crisis. Now, as inflation seems to be slowing down somewhat, albeit, with a few hurdles along the way, it has led to a key question: could the European Central Bank (ECB) cut interest rates this summer?

So far, the ECB has maintained what it calls a "data-driven" approach to inflation, holding out for more conclusive and lasting evidence of inflation really coming down. These include inflation, labour market, retail sales and gross domestic product (GDP) reports, amongst others.

In its press release regarding the April monetary policy meeting, the bank said: "If the Governing Council's updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction."

The bank has already dropped numerous hints that a rate cut could be coming as early in June, which has gone a long way towards propping up investor and consumer morale.

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