Inflation in Spain nearly halved in a month, with energy costs dropping to 3.1% in March.
The year-on-year rate of increase in consumer prices in Spain rose from 6% in the previous month and was lower than the 4% forecast of economists polled by Reuters.
This decline could be reflected across Europe as lower energy prices affect consumers’ gas and electricity costs. German inflation will be released on Thursday, while French figures will be released on Friday.
The drop in headline numbers could reinforce calls for the European Central Bank to stop raising borrowing costs at its next meeting in May.
Europe’s Stox 600 Index was up 0.8% from Thursday morning’s close, while Spain’s Ibex 35 was up 1.5%.
Spain has acted as a leading indicator during rising inflationary pressures in Europe last year as energy prices respond to wholesale market movements faster than other countries. Gas prices in Europe were €43 per MWh on Thursday, down from €175 six months ago.
However, March prices were 1.1% higher than the previous month. Core inflation, which excludes energy and fresh food prices, fell slightly to 7.5%.
Ahead of Spain’s figures, some members of the ECB’s board called for a more cautious approach after raising interest rates by half a percentage point this month.
The banking sector turmoil has also opened up the prospect of a potential credit crunch that could put the brakes on both inflation and growth in the coming months.
But more hawkish council members argue the ECB needs to discount the sharp volatility in energy prices and focus on potential price pressures.
The most hawkish member of the ECB Governing Council, Isabel Schnabel, said at an event in Washington late Wednesday that core inflation had turned out to be more tenacious than expected and that it was “a headache for central banks.” There is,’ he said.
