The European Union has taken almost a year and a half to contain inflation, although it is still at 10% year-on-year. A rate that shows that there is still a long way to go to bring it to reasonable levels. In the statistics published yesterday, the data for Spain stands out (6.6%), which places it as the economy with a lower level.
The first dam to contain the rise in prices has been achieved two weeks after the ECB (European Central Bank) decides if it is necessary to continue raising rates. Will the strategy change?
“It is early for the ECB to change its strategy just because inflation is moderating a bit in the Eurozone as a whole. Of course, he is also watching out of the corner of his eye if the dreaded recession arrives that can change plans ”, answers Santiago Carbó, director of Economic Studies at Funcas. For Miguel Jiménez, from BBVA Research, “yesterday's moderation was a surprise and it is positive, after several months that it has been surprising on the rise. In the December meeting there will be a debate on keeping the increases in line with the last meeting (75 basis points) or moderating them to 50 basis points, and this data favors the second option, which is the forecast we have for December in BBVA Research”. Funcas and CaixaBank agree that the next rate rise will be 0.5%.
The economist from CaixaBank Research's department of economy and international markets, Adrià Morron, recalls that “the ECB has clearly said that its fight against inflation is not over and that it will continue to raise rates in the coming months. However, he is reorienting his strategy of tightening monetary policy: looking ahead to the next meetings, we expect the increases to be more moderate and that the decisions give greater weight to the evolution of the latest data."
María Romero, Afi's managing partner of Economy, insists that "the moderation of inflation will take a long time", which is why she believes that the ECB will maintain the interest rate policy. The economist adds that yesterday the market did not interpret that there was going to be a change in trend either.
The price escalation started in the summer of 2021 and it was not until last month that the ECB measures managed to stop the trend. "Perhaps at the meeting on December 15, the ECB will convey that there is less of a hike left, but for now that message has not been given." advises Carbó. In November, the rise in energy prices moderated to a year-on-year rate of 34.9% from 41.5% in October, while the price increase for fresh food was 13.8%, compared to 15, 5% from last month. Morron predicted that “in the spring of 2023, we think that the slowdown in activity and sustained signs of moderation in inflation will allow the ECB to stop rate hikes.”
In the case of Spain, the greater containment of inflation is linked to the subsidies for energy or transport launched by the Government. "Surely they have influenced in the short term," said Carbó. “Our lower reliance on gas (which is probably the most inflationary) with gas demand that has moderated (good weather has helped) may be playing a role as well. In any case, it must be observed that core inflation has not yet subsided, so that inflation will remain high (above 5%) seems very likely for at least several months”, he added.
Javier Ibáñez de Aldecoa, an economist at CaixaBank Research, specifies that “the moderation of inflation in recent months in Spain can be explained almost exclusively by the moderation of inflation in the electricity component of the CPI. The interannual rate of said component has gone from growing by more than 60% in the month of August to falling by 15.4% in October”.
