Prices have slightly accelerated their rate of rise in October. The rate of inflation has rebounded this month to 1.8%according to the provisional reading of the Consumer Price Index (CPI) advanced this Wednesday by the National Institute of Statistics (INE). This increase occurs in a month of October marked by the partial withdrawal of the VAT reduction on food, which has pushed up the prices of the products that make up the bulk of the shopping basket. Nevertheless, The INE attributes the rebound mainly to the increase in fuel pricesand also, although to a lesser extent, to the rise in electricity and gas prices. For its part, core inflation has risen one tenth to 2.5%.
The CPI thus breaking the streak of four chained descents which led it to register an interannual variation rate of 1.5% in September, the lowest inflation level since March 2021, even before the Russian invasion of Ukraine unleashed the inflation crisis. However, the pace of price growth is still maintained for the second consecutive month below 2% set as a target by the European Central Bank (ECB) and far from the 3% threshold that it exceeded for almost the entire first half of the year.
It remains to be seen how the slight acceleration in prices has affected the behavior of food after the partial withdrawal of the VAT bonus. Since October 1, the tax on basic products such as olive oil, milk, bread, eggs, cheese, fruit, vegetables, legumes, cereals and flour has gone from 0% to 2 %, while the tax rate on pasta and seed oils has increased from 5% to 7.5%.
We will have to wait until the middle of the month to know the exact food inflation data when the INE releases the final CPI figures and the breakdown by product category, but the provisional reading already points to a price increase that would have made abandon the 1.8% rate recorded in Septemberits lowest level since October 2021. The consumer associations Asufin and Facua point out that the increase in prices would have been noticeable in bananas, potatoes, grapes and lentils.
The rise in inflation in October was, therefore, expected. In fact, the president of the ECB herself, Christine Lagarde, warned fifteen days ago of the acceleration in prices expected until the end of the year after the surprising slowdown registered in September. “Have we broken the neck of inflation? Not yet. But are we breaking the neck of inflation? Yes, I think so. It is not completely broken yet, but we are close to achieving it,” said the Frenchwoman after the October meeting of the ECB, in which the monetary authority decided to undertake the third cut in interest rates so far this year and lower them to around 3.25% in light of the evolution of prices and without losing sight of the economic stagnation of the eurozone.
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