Spain Inflation Stays Stubborn in October as Final Data Confirm 4.9% CPI, Keeping ECB Rate-Hike Expectations Alive
Key Takeaways
- •Spain's final October CPI was confirmed at 4.9% year-on-year, matching both the preliminary estimate and the previous month's reading.
- •The final HICP, the harmonised measure used for euro-area comparisons, came in at 4.9%, slightly below the prior 5.0%.
- •Core annual inflation held at 3.1% in October, unchanged from September and remaining well above the ECB's 2% target.
- •Markets are pricing in roughly 82% odds of another ECB policy move at the December meeting.
- •Alongside France's earlier report, the Spanish data reinforce that inflation remains a major challenge for the ECB, which must balance persistent price pressures against flagging economic growth.
Spain's final October inflation report confirmed no change to the preliminary estimates, reaffirming that Spanish price pressures remain stubbornly elevated, with headline inflation holding near the 5% mark for a second straight month. Final figures close out the numbers first published as preliminary estimates earlier in the month, so Spain's inflation picture is now locked in ahead of the ECB's December policy meeting.
The final figures:
- Final CPI: +4.9% year-on-year, in line with the +4.9% preliminary estimate; prior +4.9%
- Final HICP: +4.9% year-on-year, in line with the +4.9% preliminary estimate; prior +5.0%
- Core CPI: +3.1% year-on-year; prior +3.1%
The latest drop in energy prices over the past week or so might help eventually, but it will take time to filter through to the economy. For now, inflation pressures sit at a rather uncomfortable level for Spain.
Core annual inflation was reaffirmed at 3.1% in October, unchanged from September. That remains well above what the European Central Bank (ECB) would be comfortable with, as price pressures continue to pull away from the bank's 2% target. The HICP reading carries weight beyond Spain as well, since the Harmonised Index of Consumer Prices is the standardised measure used to compare inflation across EU member states and underpins the euro-area-wide figures the ECB sets policy against.
Alongside the French inflation report released earlier, the Spanish figures continue to reaffirm that inflation remains a major threat the ECB has to deal with heading into the final stages of this year, offering a read on price pressures across two of the euro area's largest economies.
As things stand, markets are pricing in roughly 82% odds of the ECB making another move in December. Policymakers might very well have to go with the flow amid fears that flagging economic growth conditions could make their jobs much tougher come next year.
In the grand scheme of things, it is not a good look for the ECB, which faces a tough balancing act: on one hand, dealing with more persistent price pressures before they get out of control; on the other, avoiding sending the broader economy off a cliff.
Source: ForexLive
