Overview of Inflation in March and Its Driving Factors
The inflation rate rose to 3.2 percent in March, driven by swings in electricity prices. After nearly three years with a reduced value-added tax, the electricity tax regime was normalized last month, according to the advanced indicator of the consumer price index published by the National Statistics Institute. Although the figure is not final until mid-April, it already points to a clear moderation in food prices and suggests households may face steadier price levels moving forward.
The underlying inflation, which strips out unprocessed food and energy, continued to ease, easing by two tenths in March to 3.3 percent. This marks the lowest rate in the past two years, according to sources from the Ministry of Economy. Government communications emphasize that price moderation can sit alongside social protections and support for the most vulnerable families. INE data show a 0.3 percent rise in the overall CPI in March from February, with the underlying inflation rising by 0.5 percent in the same period.
This price trajectory follows a start to 2024 that saw a higher annual rate, reaching 3.4 percent, largely driven by the VAT increases on electricity and gas. In February, a cooling in the shopping basket and, especially, a decline in electricity bills helped contain inflation, bringing the rate to 2.8 percent. The momentum seen earlier in the year contrasts with the peak observed in April of the previous year when inflation reached 4.1 percent before easing in subsequent months. Over 2023, the overall price level exhibited notable moderation compared with the prior year, which had seen a sharp rise up to 10.8 percent in July 2022.
The current data continue to show a pandemic-era-like pattern of inflation that stabilizes step by step as energy costs fluctuate and household demand adjusts. Analysts note that while headline inflation provides a snapshot, the persistence of price pressure in core components remains a critical area for monitoring. The government’s stance highlights protecting households through social measures while allowing gradual price adjustments that reflect energy market changes and broader economic conditions. These dynamics are closely watched by policymakers as they balance price stability with social equity and economic resilience. (INE)
Looking ahead, the evolving mix of energy costs, consumer demand, and policy interventions will shape inflation in the coming months. If energy prices hold steady or ease further, it could support continued moderation in both headline and core inflation measures. Conversely, any renewed spikes in electricity or gas tariffs could reframe the inflation trajectory, requiring ongoing attention from authorities and market watchers alike. (INE)