SPAIN’S inflation rate went up by 0.2% in January to reach an annual figure of 3.5%- mainly due to increased VAT charges on electricity bills.

Figures from the National Statistics Institute(INE) released on Tuesday showed that the important core inflation rate, which does not include fresh food and energy prices, had fallen to 3.6%, as opposed to 3.8% in December.

“Electricity put up inflation in January because its price increased, compared to the drop it had a year ago,” the INE said.

Spain’s January inflation rate was one of the lowest among major economies in the euro zone, although it still exceeded the European Central Bank’s 2% target.

The inflation rate is 2.5% points lower than in January 2023, when it was at 5.9%, but the reduction does not mean a return to pre-economic crisis prices, which supermarket shoppers can vouch for.

Mass consumption expert, Jose Antonio Latre, told the El Pais newspaper: “In order for prices to come down, there have to be negative inflation rates and with food, and prices have risen by 30% over three years, which is quite a loss of purchasing power.”

“If I’m asked if prices are going to go back to where they were, I would say no, because the costs that have driven prices are not cyclical but structural, except for specific cases such as olive oil, where the drought has been the key factor,” he commented.

Francisco Quintana, head of investment strategy at the ING bank in Spain expects inflation to moderate ‘in fits and starts’.

He estimates average inflation in 2024 to be 3% with hardly any major changes.

“We will probably see an erratic movement, going up and down, with a rebound when the government withdraws aid and subsidies, although the underlying trend will be slightly downward,” he predicted.

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