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Inflation in Spain eases as energy prices fall

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AFP/The Local - [email protected]
Inflation in Spain eases as energy prices fall
Inflation slows in the eurozone. Photo: Wance Paleri / Unsplash

Inflation slowed in Spain in March as energy prices fell, official data showed Thursday, adding to hopes that the Eurozone was past the worst of the price increases.

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Falling gas and electricity prices had a strong impact on Spanish inflation in March.

Headline inflation in the country slowed sharply to 3.3 percent year-on-year, from six percent in February, according to preliminary data from Spain's National Statistics Institute (INE).

The latest figures showed that "the pass-through of higher energy prices into higher consumer prices is starting to lose strength," said ING economist Wouter Thierie.

READ ALSO: EU agrees to extend Spain gas price cap until end of the year

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"Moreover, pressures on global supply chains have further eased in recent months to pre-pandemic levels, which is also dampening inflation."

With inflation across the Eurozone still well above the European Central Bank's two-percent target, the bank is expected to keep raising interest rates.

The size of the ECB's next rate hike remains unclear, however, especially after recent turmoil in the banking sector highlighted the pain of higher borrowing costs on the economy.

READ ALSO: Spain 2022 budget gap narrows more than expected

Following this month's hike by half a percentage point, many observers see the ECB downshifting and opting for a smaller rate rise at the next meeting in May.

"In the coming months, the inflation rate is likely to ease somewhat due to the effect of energy prices, but the price pressure on non-energy goods will probably persist," said LBBW (German bank) economist Jean-Oliver Niklasch.

In Germany, Europe's biggest economy, price growth also eased to 7.4 percent year-on-year in March, according to preliminary data from federal statistics agency Destatis.

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