Spain’s CPI inflation has risen once again. This time, however, it is a rather significant rise, mainly due to the increase in electricity and fuel prices. Inflation in year-on-year terms was 3.5%. To remind, the reading in June was 1.9% and was already close to the ECB’s target. However, core inflation remains much higher. It was 5.8% compared to 6.1% in August.
In Germany, inflation was 4.5% year on year. This figure turned out to be slightly lower than the consensus (4.6%) and much lower than last month when inflation was 6.1% year on year. On a monthly basis, there was an increase of 0.3%, marking the fourth consecutive month with similar price growth.
We observe two diametrically opposite directions in the CPI data. Spain managed to reach the target a few months ago, but now inflation is on the rise again due to increasing energy and fuel prices. In Germany, monthly inflation remains stable, while annual dynamics continue their downward trend.
Nevertheless, the fact remains that core inflation in both economies is high. Germany’s reading will have a significant impact on preliminary inflation data for the entire eurozone. The ECB will base its decisions on further monetary policy mainly on this data. Readings indicate deflationary tendencies, yet as can be seen eg. from Spain’s data, the battle against inflation is not over yet. I recall the words of President Lagarde, who indicated that rates would remain high as long as necessary. It seems that this necessity still persists.
Bartosz Wałecki, analyst at Michael / Ström Dom Maklerski
