Funcas projects an average annual inflation rate of 3.2% for 2024, with an expectation that it will ease and settle around 2.9% as events unfold. This view is outlined in a Friday press release that assessed the December CPI figures reported by the National Statistics Institute.
In light of recent developments, savings banks have signaled a shift in their outlook. They now anticipate a December result that surpassed expectations and have also introduced a timetable for phasing back targeted tax cuts—an element that was unclear in the prior note.
Consequently, the inflation rate is forecast to rise to about 3.3% in January. The reasoning hinges on oil prices, which have fluctuated near the levels anticipated in the central scenario, with an ongoing assumption that prices will hover around 80 dollars.
Funcas notes that the modest downward trajectory in inflation will be partly countered by a partial reversal of VAT reductions and other tax measures spread across the year. As a result, by year-end inflation is expected to remain above the 2% target set by central banks.
A senior Funcas economist explained that overall the evolution of both processed and unprocessed foods has performed better than projected, though this improvement is likely a temporary outcome rather than a fundamental shift in the inflation trend. This assessment is based on the December CPI data.
Looking ahead, the economist highlighted that future inflation dynamics remain uncertain due to unpredictable weather conditions, which have played a significant role in the past two years. Factors such as climate variability and its impact on agricultural supplies add another layer of complexity to the projection.