Spanish Inflation Jumps to Most Since August on Base Effects

(Bloomberg) -- Spanish inflation quickened to the fastest pace since August, though the acceleration was driven by base effects and is unlikely to scupper plans for the European Central Bank to continue lowering interest rates.

Consumer prices advanced 2.4% from a year ago in November, according to national statistics agency data published Thursday. That compares with 1.8% in October and is in line with the median estimate in a Bloomberg survey of economists.

A gauge of underlying pressures that strips out energy and some food prices eased to 2.4% — defying analyst predictions for it to also quicken.

A brief jump in inflation across Europe has been widely expected by ECB officials, who see their 2% target being sustainably reached next year. Spain’s figures are the first for this month from a major euro-zone economy, with Germany to publish its own later in the day. Early German data showed price growth accelerating in its regions.

Policymakers are set to look through the uptick in the euro area, where analysts reckon Friday’s number for November will come in at 2.3%. The ECB remains on course for a fourth reduction of the year in the deposit rate in two weeks’ time, to 3%.

More monetary loosening is likely to follow in 2025, though Executive Board member Isabel Schnabel told Bloomberg this week that officials shouldn’t cut borrowing costs too far.

What Bloomberg Economics Says...

“Unfavorable energy base effects will continue to exert upward pressure in December, but we expect this tick up to prove temporary. Going into 2025, the big question for Spain’s inflation outlook is how quickly will price gains in services ease. Our forecast is for the core measure to return to the ECB’s 2% target in the second half of next year.”

In Spain, the upswing in inflation was due to comparisons with energy and fuel costs that had slumped in late 2023. The country had registered price gains of less than 2% in the two previous months.

Spain has managed to restrain inflation this year, helping it record the strongest growth among the region’s top economies. While the government has rolled back some measures put in place to shield consumers when prices spiked — like value-added tax reductions on electricity bills — others such as free train tickets are still in place.

In a sign of the economy’s health, unemployment is hovering around its lowest level in more than 15 years. That’s boosting wages and contributing to the elevated increases in services prices that remain a headache for the ECB.