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Energy costs push Spain's inflation to 13-year-high

Economy Sep 29, 2021 04:58PM ET
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2/2 © Reuters. A woman wearing a face mask shops at a market in Madrid, Spain, May 31, 2021. REUTERS/Susana Vera 2/2

By Aida Pelaez-Fernandez and Inti Landauro

MADRID (Reuters) -Spain's inflation surged to a 13-year-high in September as consumer prices rose a higher than expected 4% year-on-year, official data showed on Wednesday, adding pressure on the European Central Bank to potentially tighten its policy.

The highest reading since September 2008, when the rate was 4.5%, was fuelled by energy costs and to a lesser extent by the prices of tourism packages and vehicle fuels and lubricants, according to the National Statistics Institute (INE).

One of the first euro zone countries to release inflation data for September, Spain is also seeing one of the fastest rolling 12-month price increases.

INE data also showed Spain's EU-harmonised consumer price index rose by 4.0% in September on an annual basis, also a 13-year record, up from 3.3% in August. Analysts polled by Reuters had expected a 3.7% price increase.

With price pressures steadily building on a slew of factors, from higher energy prices to supply bottlenecks, euro zone borrowing costs have risen in recent weeks as investors bring forward their interest rate hike expectations.

Analysts, bankers and regulators insist the price hike is temporary though the speed to a return to central bank target of 2% is disputed.

"The inflation episode is temporary and there is consensus on that, but it seems it will last longer than initially thought," Jose Antonio Alvarez, CEO of Spain's largest bank Santander (MC:SAN), said on Wednesday.

Spiralling energy costs have also pushed Spanish industrial prices up 18% year-on-year, the fastest pace since May 1980. Higher industrial prices are usually passed on into consumer prices, at least partly, within weeks.

European Central Bank President Christine Lagarde on Tuesday urged caution before tightening the ECB's ultra-easy policy, saying the bank would only react to a durable inflation upswing, while right now it saw no signs of a broad-based increase.

Although inflation could rise as high as 4% by the end of this year, twice the targeted rate, Lagarde argued that price growth will then quickly sink back below the bank's target and languish under its 2% objective for years to come.

A big policy move is still expected in December, when the bank is likely to decide to end a 1.85 trillion euro pandemic emergency stimulus scheme.

Energy costs push Spain's inflation to 13-year-high
 

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Comments (2)
Saroop Calvete
Saroop Calvete Sep 29, 2021 8:38AM ET
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Spain’s green new deal in energy? Misery for everybody except for the oligarchs
Chris Fran
Chris Fran Sep 29, 2021 8:38AM ET
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c@br0n there is no green deal. it's called supply and demand. capitalism? you surely know what that is.
Edward Gerety
EdwardTjGerety Sep 29, 2021 6:28AM ET
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The future of the United States as the Biden Administration and Democrats spend like drunken sailors, pushing the debt higher while attacking our domestic energy producers. Under Trump everything was cheaper, jobs and businesses flourished, minorities had the lowest unemployment ever.I'm missing those Tweets.
Vv Pp
Vv Pp Sep 29, 2021 6:28AM ET
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🤦‍♀️
Co Gonz
Co Gonz Sep 29, 2021 6:28AM ET
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agreed- not sure what Vv Pp is on but they obviously are lost
Chris Fran
Chris Fran Sep 29, 2021 6:28AM ET
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ed put the pipe...it's because of Trump that we're in this mess. if he had contained covid, there would be no Lockdown and no supply chain disruption.. thanks again Trump
 
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